INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, ACTING THROUGH INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, DUBAI (DIFC) BRANCH

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1 BASE PROSPECTUS INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, ACTING THROUGH INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, DUBAI (DIFC) BRANCH (a joint stock company incorporated in the People s Republic of China with limited liability) US$4,000,000,000 Euro Medium Term Note Programme Under this US$4,000,000,000 Euro Medium Term Note Programme (the Programme), Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch (the Issuer), subject to compliance with all relevant laws, regulations and directives, may from time to time issue notes (the Notes) denominated in any currency agreed between it and the relevant Dealer (as defined below). Notes may be issued in bearer or registered form (respectively Bearer Notes and Registered Notes). The maximum aggregate nominal amount of all Notes from time to time outstanding under the Programme will not exceed US$4,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement described herein), subject to increase as described herein. The Notes may be issued on a continuing basis to one or more of the Dealers specified under Overview of the Programme and any additional Dealer appointed by the Issuer under the Programme from time to time (each a Dealer and together the Dealers), which appointment may be for a specific issue or on an ongoing basis. References in this Base Prospectus to the relevant Dealer shall, in the case of an issue of Notes being (or intended to be) subscribed by more than one Dealer, be to all Dealers agreeing to subscribe such Notes. An investment in Notes issued under the Programme involves certain risks. For a discussion of these risks see Risk Factors. This Base Prospectus has been approved by the Central Bank of Ireland (the Central Bank) as competent authority under Directive 2003/71/EC (as amended, including by Directive 2010/73/EU) (the Prospectus Directive). The Central Bank only approves this Base Prospectus as meeting the requirements imposed under Irish and European Union (EU) law pursuant to the Prospectus Directive. Application has been made to the Irish Stock Exchange plc (the Irish Stock Exchange) for Notes issued under this Programme during the period of 12 months from the date of this Base Prospectus to be admitted to its official list (the Irish Official List) and to trading on its regulated market (the Main Securities Market) or on another regulated market for the purposes of Directive 2004/39/EC (MiFID) and/or that are to be offered to the public in any member state of the European Economic Area in circumstances that require a prospectus. The Main Securities Market is a regulated market for the purposes of MiFID. Such approval relates only to the Notes which are to be admitted to trading on a regulated market for the purposes of MiFID and/or which are to be offered to the public in any Member State of the European Economic Area. This Base Prospectus has been approved by the Dubai Financial Services Authority (the DFSA) under the DFSA s Markets Rule 2.6 and is therefore an Approved Prospectus for the purposes of Article 14 of the DFSA s Markets Law Application has also been made to the DFSA for Notes issued under the Programme during the period of 12 months from the date of this Base Prospectus to be admitted to the official list of securities (the DFSA Official List) maintained by the DFSA and to NASDAQ Dubai for such Notes to be admitted to trading on NASDAQ Dubai. Notice of the aggregate nominal amount of Notes, interest (if any) payable in respect of Notes, the issue price of Notes and certain other information which is applicable to each Tranche (as defined under Terms and Conditions of the Notes ) of Notes will be set out in a final terms document (the Final Terms) which, with respect to Notes to be listed on the Irish Stock Exchange, will be delivered to the Central Bank and the Irish Stock Exchange and, with respect to Notes to be listed on NASDAQ Dubai, will be delivered to the DFSA and NASDAQ Dubai before the listing of Notes of such Tranche. References in this Base Prospectus to Notes being listed (and all related references) shall mean that (a) such Notes have been admitted to the Irish Official List and to trading on the Main Securities Market and/or (b) such Notes have been admitted to the DFSA Official List and to trading on NASDAQ Dubai. The Programme provides that Notes may be listed or admitted to trading, as the case may be, on such other or further stock exchanges or markets as may be agreed between the Issuer and the relevant Dealer. The relevant Final Terms in respect of any Series (as defined in Terms and Conditions of the Notes ) will specify whether or not such Notes will be listed and, if so, on which exchange(s) the Notes are to be listed. The Issuer may also issue unlisted Notes and/or Notes not admitted to trading on any market. The DFSA does not accept any responsibility for the content of the information included in this Base Prospectus, including the accuracy or completeness of such information. The liability for the content of this Base Prospectus lies with the Issuer. The DFSA has also not assessed the suitability of any Notes issued under this Programme to any particular investor or type of investor. If you do not understand the contents of this Base Prospectus or are unsure whether any Notes issued under this Base Prospectus are suitable for your individual investment objectives and circumstances, you should consult an authorised financial adviser. The Issuer has been rated A1 by Moody s Investors Service Hong Kong Limited (Moody's) and A by Standard & Poor s Hong Kong Limited (Standard & Poor s). The Programme has been rated (P) A1 long-term and (P) P-1 short-term by Moody s. Neither Moody s nor Standard & Poor s is established in the European Union and neither of them has applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). The Issuer's ratings have been endorsed by Moody s Investors Service Ltd. and Standard & Poor s Credit Market Services Europe Ltd., respectively, in accordance with the CRA Regulation. Each of Moody s Investors Service Ltd. and Standard & Poor s Credit Market Services Europe Ltd. is established in the European Union and registered under the CRA Regulation. As such, each of Moody s Investors Service Ltd. and Standard & Poor s Credit Market Services Europe Ltd. is included in the list of credit rating agencies

2 published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation. The European Securities and Markets Authority has indicated that ratings issued in Hong Kong which have been endorsed by Moody s Investors Service Ltd. or Standard & Poor s Credit Market Services Europe Ltd. may be used in the EU by the relevant market participants. Where a Tranche of Notes is rated, such rating will be disclosed in the Final Terms and will not necessarily be the same as the rating assigned to the Programme by Moody s. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) or with any U.S. State securities laws and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons as defined in Regulation S under the Securities Act unless an exemption from the registration requirements of the Securities Act is available and in accordance with all applicable state securities laws of any state of the United States and any other jurisdiction. See Form of the Notes for a description of the manner in which Notes will be issued. Registered Notes are subject to certain restrictions on transfer, see Subscription and Sale. The Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a supplemental Base Prospectus, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. The language of the Base Prospectus is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. CITIGROUP ICBC INTERNATIONAL Arrangers and Dealers EMIRATES NBD CAPITAL NATIONAL BANK OF ABU DHABI P.J.S.C. Dealers CRÉDIT AGRICOLE CIB HSBC INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, J.P. MORGAN ACTING THROUGH INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, DUBAI (DIFC) BRANCH The date of this Base Prospectus is 3 June 2016.

3 This Base Prospectus complies with the requirements in Part 2 of the Markets Law (DIFC Law No. 1 of 2012) and Chapter 2 of the Markets Rules and comprises a base prospectus in respect of all Notes (other than Notes for which no prospectus is required to be published under the Prospectus Directive, such Notes being referred to in this Base Prospectus as Exempt Notes) issued under the Programme for the purposes of Article 5.4 of the Prospectus Directive. When used in this Base Prospectus, "Prospectus Directive" means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European Economic Area. The Issuer and the Bank accept responsibility for the information contained in this Base Prospectus and the Final Terms for each Tranche of Notes issued under the Programme. The Issuer, having made all reasonable enquiries confirms that to the best of its knowledge and belief (i) this Base Prospectus contains all information with respect to the Issuer, Industrial and Commercial Bank of China Limited (the Bank) and its subsidiaries (the Group, we or us) and the Notes which is material in the context of the issue and offering of the Notes; (ii) the statements contained herein relating to the Issuer, the Group and the Notes are in every material respect true and accurate and not misleading and there are no other facts in relation to the Issuer, the Group or the Notes the omission of which would, in the context of the issue and offering of the Notes, make any statement in this Base Prospectus misleading or affect its import; (iii) the statements of intention, opinion and belief or expectation contained in this Base Prospectus with regard to the Issuer and the Group are honestly and reasonably made or held, have been reached after considering all relevant circumstances; and (iv) all reasonable enquiries have been made by the Issuer to ascertain such facts and to verify the accuracy of all such information and statements. The Issuer confirms that having taken all reasonable care to ensure that such is the case, the information contained in this Base Prospectus is, to the best of its knowledge, in accordance with the facts and contains no omission likely to affect its import. This Base Prospectus has been prepared by the Issuer for use in connection with the offer and sale of the Notes outside the United States. The Issuer and the Dealers reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Base Prospectus does not constitute an offer to any person in the United States. Distribution of this Base Prospectus by any non-u.s. person outside the United States, in respect of any offering of Notes under Category 2 of Regulation S of the Securities Act, to any U.S. person, or to any other person within the United States, is unauthorised and any disclosure without the prior written consent of the Issuer of any of its contents to, in respect of any offering of Notes under Category 2 of Regulation S of the Securities Act, any such U.S. person or other person within the United States, is prohibited. Subject as provided in the applicable Final Terms, the only persons authorised to use this Base Prospectus in connection with an offer of Notes are the persons named in the applicable Final Terms as the relevant Dealer or the Managers, as the case may be. This Base Prospectus is to be read in conjunction with all documents which are deemed to be incorporated herein by reference (see Information Incorporated by Reference ). This Base Prospectus shall be read and construed on the basis that such documents are incorporated and form part of this Base Prospectus. To the fullest extent permitted by law, none of (i) Citigroup Global Markets Limited, (ii) Crédit Agricole Corporate and Investment Bank, (iii) Emirates NBD PJSC (iv) HSBC Bank plc, (v) ICBC International Securities Limited, (vi) Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch (other than in its capacity as Issuer), (vii) J.P. Morgan Securities plc and (viii) National Bank of Abu Dhabi P.J.S.C., the Dealers or the Agents (as defined in the Agency Agreement) accepts any responsibility or liability for the contents of this Base Prospectus, for the information incorporated by reference into this Base Prospectus, or for any other statement, made or purported to be made by the Arrangers, the Dealers or the Agents or on any of their behalf in connection with the Issuer or the issue and offering of the Notes. To the fullest extent permitted by law, each Arranger, each Dealer and each Agent accordingly disclaims all and any liability whether arising in tort or contract or otherwise which it might otherwise have in respect of this Base Prospectus or any such statement. 1

4 No person is or has been authorised by the Issuer to give any information or to make any representation not contained in or not consistent with this Base Prospectus in connection with the Programme or the Notes and, if given or made, such information or representation must not be relied upon as having been authorised by the Issuer, the Arrangers or the Agents or any of the Dealers. Neither this Base Prospectus nor any other information supplied in connection with the Programme or any Notes (i) is intended to provide the basis of any credit or other evaluation or (ii) should be considered as a recommendation by the Issuer, the Bank, the Arrangers, the Agents or any of the Dealers that any recipient of this Base Prospectus or any other information supplied in connection with the Programme or any Notes should purchase any Notes. Each investor contemplating purchasing any Notes should determine for itself the relevance of the information contained in this Base Prospectus and should make its own independent investigation of the Bank s financial condition and affairs, and its own appraisal of its creditworthiness. Neither this Base Prospectus nor any other information supplied in connection with the Programme or the issue of any Notes constitutes an offer or invitation by or on behalf of the Issuer, the Bank or any of, the Arrangers the Agents or the Dealers to any person to subscribe for or to purchase any Notes. None of the Dealers, the Arrangers and the Agents undertake to review the financial condition or affairs of the Bank during the life of the arrangements contemplated by this Base Prospectus nor to advise any investor or potential investor in the Notes of any information coming to the attention of any of the Dealers, the Arrangers or the Agents. Neither the delivery of this Base Prospectus nor the offering, sale or delivery of any Notes shall in any circumstances imply: (i) that there has been no change in the affairs of the Bank, its subsidiaries and/or associated companies since the date hereof (or the date on which this Base Prospectus has been most recently amended or supplemented); (ii) that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the prospects or financial or trading position of the Bank or the Group since the date hereof (or the date on which this Base Prospectus has been most recently amended or supplemented); (iii) that the information contained herein is correct at any time subsequent to the date hereof (or the date on which this Base Prospectus has been most recently amended or supplemented); or (iv) that any other information supplied in connection with the Programme is correct as of any time subsequent to the date on which it is supplied or, if different, the date indicated in the document containing the same. The Arrangers, the Agents and the Dealers expressly do not undertake to review the financial condition or affairs of the Bank during the life of the Programme or to advise any investor in the Notes of any information coming to their attention. The Notes have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and include Notes in bearer form that are subject to U.S. tax law requirements. Subject to certain exceptions from the Securities Act and applicable securities laws, Notes may not be offered, sold or delivered within the United States or to, or for the account or benefit of, U.S. persons. For a description of certain restrictions on offers and sales of Notes and on distribution of this Base Prospectus, see Subscription and Sale. In the case of any Notes which are to be admitted to trading on a regulated market within the European Economic Area or offered to the public in a Member State of the European Economic Area in circumstances which would have required the publication of a prospectus under the Prospectus Directive (2003/71/EC), the minimum specified denomination shall be 100,000 (or its equivalent in any other currency as at the Issue Date of the Notes). This Base Prospectus does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make the offer or solicitation in such jurisdiction. The distribution of this Base Prospectus and the offer or sale of Notes may be restricted by law in certain jurisdictions. None of the Issuer, the Bank, the Arrangers, the Agents or the Dealers represent that this Base Prospectus may be lawfully distributed, or that any Notes may be lawfully offered, in compliance with any applicable registration or other requirements in any such jurisdiction, or pursuant to an exemption available thereunder, or assume any responsibility for facilitating any such distribution or offering. In particular, no action has been taken by the Issuer, the Bank, the Arrangers, the Agents or the Dealers which is intended to permit a public offering of any Notes or distribution of this Base Prospectus in any jurisdiction where action for that purpose is required. Accordingly, no 2

5 Notes may be offered or sold, directly or indirectly, and neither this Base Prospectus nor any advertisement or other offering material may be distributed or published in any jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations. Persons into whose possession this Base Prospectus or any Notes may come must inform themselves about, and observe, any such restrictions on the distribution of this Base Prospectus and the offering and sale of Notes. In particular, there are restrictions on the distribution of this Base Prospectus and the offer or sale of Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong Kong, Singapore, Thailand, the People s Republic of China (the PRC), the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain and the State of Qatar, see Subscription and Sale. In making an investment decision, investors must rely on their own examination of the Bank and the terms of the Notes being offered, including the merits and risks involved. The Notes have not been approved or disapproved by the United States Securities and Exchange Commission or any other securities commission or other regulatory authority in the United States, nor have the foregoing authorities approved this Base Prospectus or confirmed the accuracy or determined the adequacy of the information contained in this Base Prospectus. Any representation to the contrary is unlawful. None of the Issuer, the Bank, the Arrangers, the Agents or the Dealers makes any representation to any investor in the Notes regarding the legality of its investment under any applicable laws. Any investor in the Notes should be able to bear the economic risk of an investment in the Notes for an indefinite period of time. This Base Prospectus has been prepared on a basis that would permit an offer of Notes with a denomination of less than 100,000 (or its equivalent in any other currency) only in circumstances where there is an exemption from the obligation under the Prospectus Directive to publish a prospectus. As a result, any offer of Notes in any Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State) must be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of Notes. Accordingly any person making or intending to make an offer of Notes in that Relevant Member State may only do so in circumstances in which no obligation arises for the Issuer, the Bank or any Dealer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Issuer, the Bank nor any Dealer have authorised, nor do they authorise, the making of any offer of Notes in circumstances in which an obligation arises for the Issuer, the Bank or any Dealer to publish or supplement a prospectus for such offer. SERVICE OF PROCESS AND ENFORCEMENT OF CIVIL LIABILITIES The Bank is a company incorporated under the laws of the PRC and a substantial majority of its businesses, assets and operations are located in the PRC. In addition, a substantial majority of the Bank s Directors, supervisors and executive officers reside in the PRC and substantially all of their assets are located in the PRC. As a result, it may not be possible to serve legal written process outside the PRC upon the Bank or such Directors, supervisors or executive officers, including with respect to matters arising under securities laws of jurisdictions outside the PRC. Moreover, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgements of courts with the United States, the United Kingdom, Japan and many other countries. As a result, recognition and enforcement in the PRC of judgements of a court in any jurisdiction outside the PRC in relation to any matter may be difficult or impossible. PRESENTATION OF FINANCIAL AND OTHER INFORMATION Certain monetary amounts set out in this Base Prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in tables may not be the arithmetic sums of the figures that precede them. In this Base Prospectus, references to U.S. dollars, U.S.$, US Dollar, US$ or USD are to United States dollars, the lawful currency of the United States, references to Sterling and are to the lawful currency of the United Kingdom, references to EUR, euro or are to Euros, the lawful currency of the Eurozone, references to 3

6 RMB or Renminbi are to the lawful currency of the PRC, references to Hong Kong dollars, Hong Kong dollar or HK$ are to Hong Kong dollars, the lawful currency of Hong Kong, references to NTD are to New Taiwan dollars, the lawful currency of Taiwan, references to TRY are to Turkish lira, the lawful currency of Turkey, references to MOP are to Macau pataca, the lawful currency of Macau, references to MXN are to Mexican Pesos, the lawful currency of Mexico; references to MYR are to Malaysian ringgit, the lawful currency of Malaysia, references to IDR are to Indonesian rupiah, the lawful currency of Indonesia, references to THB are to Thai baht, the lawful currency of Thailand, references to KZT are to Kazakhstani tenge, the lawful currency of Kazakhstan, references to NZD are to New Zealand dollars, the lawful currency of New Zealand, references to RUB are to Russian rubles, the lawful currency of Russia, references to CAD are to Canadian dollars, the lawful currency of Canada, references to ARS are to Argentine pesos, the lawful currency of Argentina, references to BRL are to Brazilian real, the lawful currency of Brazil and references to ZAR are to South African rand, the lawful currency of South Africa and references to yen are to Japanese yen, the lawful currency of Japan. Solely for your convenience, this Base Prospectus contains translations of certain amounts denominated in Renminbi, U.S. dollars and Euro. Unless indicated otherwise, (i) the translations between Renminbi and U.S. dollars were made at the rate of RMB to U.S.$1.00, being the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York on 28 November 2014, and (ii) the translations between Renminbi and Euro were made at the rate of RMB to EUR1.00, being the Bloomberg Composite Rate on 3 December No representation is made that the amounts denominated in one currency could actually be converted into the amounts denominated in another currency at the rates indicated or at all. Further information on exchange rates are set forth in the section headed Exchange Rate Information in this Base Prospectus. Unless otherwise indicated, the financial information included in this Base Prospectus is extracted or derived from the audited consolidated financial statements as at and for the years ended 31 December 2014 and 2015, prepared and presented in accordance with the International Financial Reporting Standards (IFRS), and the unaudited and unreviewed consolidated financial results as at and for the three months ended 31 March 2016 prepared and presented based on IFRS. Significant differences exist between IFRS and generally accepted accounting principles in the United States (U.S. GAAP) that might be material to the financial information herein. The Bank has made no attempt to quantify the impact of those differences. In making an investment decision, prospective investors must rely upon their own examination of the Bank, the terms of the offering and the financial information. Prospective investors should consult their own professional advisers for an understanding of the differences between IFRS and U.S. GAAP and how those differences might affect the financial information herein. Certain statistical data and other information appearing in this Base Prospectus, including under the headings Risk Factors and Description of the Bank, have been extracted from public sources identified in this Base Prospectus such as the People s Bank of China (the PBOC). None of the Arrangers, the Dealers nor the Issuer accepts responsibility for the factual correctness of any such statistics or information but the Issuer accepts responsibility for accurately extracting and transcribing such statistics and information and believes, after due inquiry, that such statistics and information represent the most current publicly available statistics and information from such sources at the dates and for the periods with respect to which they have been presented. The Issuer confirms that all such third party information has been accurately reproduced and, so far as it is aware and has been able to ascertain from that published information, no facts have been omitted which would render the reproduced information inaccurate or misleading. Capitalised terms which are used but not defined in any particular section of this Base Prospectus will have the meaning attributed thereto in Terms and Conditions of the Notes or any other section of this Base Prospectus. In addition in this Base Prospectus, references to China, Mainland China and the PRC in this Base Prospectus mean the People s Republic of China and for geographical reference only (unless otherwise stated) exclude Taiwan, Macau and Hong Kong; references to PRC Government mean the government of the PRC; references to Hong Kong are to the Hong Kong Special Administrative Region of the People s Republic of China; references to Macau are to the Macau Special Administrative Region of the People s Republic of China; references to United 4

7 States or U.S. are to the United States of America, and all references to UK or United Kingdom are to the United Kingdom of Great Britain and Northern Ireland. CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS The Issuer has included statements in this Base Prospectus which contain words or phrases such as will, would, aim, aimed, is likely, are likely, believe, expect, expected to, will continue, anticipated, schedule, estimate, estimating, intend, plan, seeking to, future, objective, should, can, could, may, and similar expressions or variations of such expressions, that are forward-looking statements. However, these words are not the exclusive means of identifying forward-looking statements. All statements regarding the expected financial position, business strategy, plans and prospects of the Bank (including the financial forecasts, profit projections, statements as to the expansion plans of the Bank, expected growth in the Bank and other related matters), if any, are forward-looking statements and accordingly, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Bank to be materially different from any future results, performance or achievements expressed or implied by such forwardlooking statements. These factors are discussed in greater detail under the section Risk Factors Risks relating to this Base Prospectus Risks relating to forward-looking statements. Given the risks and uncertainties that may cause the actual future results, performance or achievements of the Bank to be materially different from the results, performance or achievements expected, expressed or implied by the forward-looking statements in this Base Prospectus, undue reliance must not be placed on such forward-looking statements. None of the Issuer, the Bank, the Arrangers or any of the Dealers or any of the Agents represents or warrants that the actual future results, performance or achievements of the Bank will be as discussed in those statements. Further, the Issuer disclaims any responsibility, and undertakes no obligation, to update or revise any forward-looking statement contained herein to reflect any changes in the expectations with respect thereto after the date of this Base Prospectus or to reflect any changes in events, conditions or circumstances on which such statements are based. NOTICE TO THE RESIDENTS OF BAHRAIN In relation to investors in the Kingdom of Bahrain, securities issued in connection with this Base Prospectus and related offering documents may only be offered in registered form to existing accountholders and accredited investors as defined by the Central Bank of Bahrain (the CBB) in the Kingdom of Bahrain where such investors make a minimum investment of at least U.S.$100,000 or any equivalent amount in other currency or such other amount as the CBB may determine. This Base Prospectus does not constitute an offer of securities in the Kingdom of Bahrain in terms of Article (81) of the Central Bank and Financial Institutions Law 2006 (decree Law No. 64 of 2006). This Base Prospectus and related offering documents have not been and will not be registered as a prospectus with the CBB. Accordingly, no securities may be offered, sold or made the subject of an invitation for subscription or purchase nor will this Base Prospectus or any other related document or material be used in connection with any offer, sale or invitation to subscribe or purchase securities, whether directly or indirectly, to persons in the Kingdom of Bahrain, other than to accredited investors for an offer outside the Kingdom of Bahrain. The CBB has not reviewed, approved or registered this Base Prospectus or related offering documents and it has not in any way considered the merits of the securities to be offered for investment, whether in or outside the Kingdom of Bahrain. Therefore, the CBB assumes no responsibility for the accuracy and completeness of the statements and information contained in this Base Prospectus and expressly disclaims any liability whatsoever for any loss howsoever arising from reliance upon the whole or any part of the content of this Base Prospectus. No offer of 5

8 securities will be made to the public in the Kingdom of Bahrain and this Base Prospectus must be read by the addressee only and must not be issued, passed to, or made available to the public generally. NOTICE TO THE RESIDENTS OF THE KINGDOM OF SAUDI ARABIA This Base Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations issued by the Capital Market Authority of the Kingdom of Saudi Arabia (the Capital Market Authority). The Capital Market Authority does not make any representations as to the accuracy or completeness of this Base Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Base Prospectus. Prospective purchasers of Notes issued under the Programme should conduct their own due diligence on the accuracy of the information relating to the Notes. If a prospective purchaser does not understand the contents of this Base Prospectus he or she should consult an authorised financial adviser. NOTICE TO THE RESIDENTS OF THE STATE OF QATAR This Base Prospectus does not and is not intended to constitute an offer, sale or delivery of bonds or other debt financing instruments under the laws of the State of Qatar and has not been and will not be reviewed or approved by or registered with the Qatar Financial Markets Authority, the Qatar Financial Centre Regulatory Authority or the Qatar Central Bank. The Notes are not and will not be traded on the Qatar Exchange. STABILISATION IN CONNECTION WITH THE ISSUE OF ANY TRANCHE OF NOTES, THE DEALER OR DEALERS (IF ANY) NAMED AS THE STABILISATION MANAGER(S) IN THE APPLICABLE FINAL TERMS (OR PERSONS ACTING ON BEHALF OF ANY STABILISATION MANAGER(S)) MAY OVER-ALLOT NOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO ASSURANCE THAT THE STABILISATION MANAGER(S) (OR PERSONS ACTING ON BEHALF OF A STABILISATION MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE RELEVANT TRANCHE OF NOTES IS MADE AND, IF BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THE ISSUE DATE OF THE RELEVANT TRANCHE OF NOTES AND 60 DAYS AFTER THE DATE OF THE ALLOTMENT OF THE RELEVANT TRANCHE OF NOTES. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THE RELEVANT STABILISATION MANAGER(S) (OR PERSONS ACTING ON BEHALF OF ANY STABILISATION MANAGER(S)) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES. 6

9 TABLE OF CONTENTS Page Overview of the Programme...8 Risk Factors...13 Information Incorporated by Reference...40 Summary Consolidated Financial and Other Information...41 Exchange Rate Information...44 Use of Proceeds...45 Form of the Notes...46 Terms and Conditions of the Notes...50 Applicable Final Terms...79 Capitalisation and Indebtedness...90 Description of the Issuer...91 Description of the Bank...93 Taxation Subscription and Sale General Information

10 OVERVIEW OF THE PROGRAMME The following overview does not purport to be complete and is taken from, and is qualified in its entirety by, the remainder of this Base Prospectus and, in relation to the terms and conditions of any particular Tranche of Notes, the applicable Final Terms. The Issuer and any relevant Dealer may agree that Notes shall be issued in a form other than that contemplated in the Terms and Conditions, in which event a new Base Prospectus or a supplement to the Base Prospectus, if appropriate, will be published. This Overview constitutes a general description of the Programme for the purposes of Article 22.5(3) of Commission Regulation (EC) No 809/2004 implementing the Directive 2003/71/EC (the Prospectus Regulation). Words and expressions defined in Form of the Notes and Terms and Conditions of the Notes shall have the same meanings in this overview. Issuer... Risk Factors... Description... Arrangers... Dealers... Certain Restrictions... Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch. There are certain factors that may affect the Issuer s ability to fulfil its obligations under Notes issued under the Programme. These are set out under Risk Factors. In addition, there are certain factors which are material for the purpose of assessing the market risks associated with Notes issued under the Programme. These are set out under Risk Factors Risks relating to the Notes and include the fact that the Notes may not be a suitable investment for all investors, certain risks relating to the structure of particular Series of Notes and certain market risks. Euro Medium Term Note Programme. Citigroup Global Markets Limited, Emirates NBD PJSC, ICBC International Securities Limited and National Bank of Abu Dhabi P.J.S.C. Citigroup Global Markets Limited, Crédit Agricole Corporate and Investment Bank, Emirates NBD PJSC, HSBC Bank plc, ICBC International Securities Limited, Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch, J.P. Morgan Securities plc, National Bank of Abu Dhabi P.J.S.C. and any other Dealers appointed from time to time by the Issuer either generally in respect of the Programme or in relation to a particular Tranche of Notes. Each issue of Notes denominated in a currency in respect of which particular laws, guidelines, regulations, restrictions or reporting requirements apply will only be issued in circumstances which comply with such laws, guidelines, regulations, restrictions or reporting requirements from time to time (see Subscription and Sale ) including the following restrictions applicable at the date of this Base Prospectus. 8

11 Notes having a maturity of less than one year Notes having a maturity of less than one year will, if the proceeds of the issue are accepted in the United Kingdom, constitute deposits for the purposes of the prohibition on accepting deposits contained in section 19 of the Financial Services and Markets Act 2000 (the FSMA) unless they are issued to a limited class of professional investors and have a denomination of at least 100,000 or its equivalent, see Subscription and Sale. Fiscal Agent... Registrar... Transfer Agent... CMU Lodging and Paying Agent... Programme Size... Distribution... Currencies... Maturities... Issue Price... Form of Notes... Clearing Systems... Citibank, N.A., London Branch. Citigroup Global Markets Deutschland AG. Citibank, N.A., London Branch. Citicorp International Limited Up to US$4,000,000,000 (or its equivalent in other currencies calculated as described in the Programme Agreement) outstanding at any time. The Issuer may increase the amount of the Programme in accordance with the terms of the Programme Agreement. Notes may be distributed by way of private or public placement and in each case on a syndicated or non-syndicated basis. Notes may be denominated in, subject to any applicable legal or regulatory restrictions, any currency agreed between the Issuer and the relevant Dealer. The Notes will have such maturities as may be agreed between the Issuer and the relevant Dealer, subject to such minimum or maximum maturities as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the Issuer or the relevant Specified Currency (as set out in the applicable Final Terms). Notes may be issued on a fully-paid basis and at an issue price which may be at par or at a discount to, or premium over, par. The Notes will be issued in bearer or registered form as described in Form of the Notes. Registered Notes will not be exchangeable for Bearer Notes and vice versa. The Central Moneymarkets Unit Service (the CMU Service), Clearstream Banking, société anonyme (Clearstream, Luxembourg), Euroclear Bank S.A./N.V. (Euroclear) and, in relation to any Tranche of Notes, such other clearing system as may be agreed between the Issuer, the relevant Paying Agent and the relevant Dealer. 9

12 Fixed Rate Notes... Floating Rate Notes... Fixed interest will be payable on such date or dates as may be agreed between the Issuer and the relevant Dealer and on redemption and will be calculated on the basis of such Day Count Fraction as may be agreed between the Issuer and the relevant Dealer. Floating Rate Notes will bear interest at a rate determined: (a) (b) (c) on the same basis as the floating rate under a notional interest rate swap transaction in the relevant Specified Currency governed by an agreement incorporating the 2006 ISDA Definitions (as published by the International Swaps and Derivatives Association, Inc. (ISDA), and as amended and updated as at the Issue Date of the first Tranche of the Notes of the relevant Series); or on the basis of a reference rate appearing on the agreed screen page of a commercial quotation service; or on such other basis as may be agreed between the Issuer and the relevant Dealer. The margin (if any) relating to such floating rate will be agreed between the Issuer and the relevant Dealer for each Series of Floating Rate Notes. Other provisions in relation to Floating Rate Notes... Floating Rate Notes may also have a maximum interest rate, a minimum interest rate or both. Interest on Floating Rate Notes in respect of each Interest Period, as agreed prior to issue by the Issuer and the relevant Dealer, will be payable on such Interest Payment Dates, and will be calculated on the basis of such Day Count Fraction, as may be agreed between the Issuer and the relevant Dealer. Zero Coupon Notes... Redemption... Zero Coupon Notes will be offered and sold at a discount to their nominal amount and will not bear interest. The applicable Final Terms will indicate either that the relevant Notes cannot be redeemed prior to their stated maturity (other than for taxation reasons or following an Event of Default) or that such Notes will be redeemable at the option of the Issuer and/or the Noteholders upon giving notice to the Noteholders or the Issuer, as the case may be, on a date or dates specified prior to such stated maturity and at a price or prices and on such other terms as may be agreed between the Issuer and the relevant Dealer. Notes having a maturity of less than one year may be subject to restrictions on their denomination and distribution, see Certain Restrictions Notes having a maturity of less than one year above. 10

13 Denomination of Notes... Taxation... Negative Pledge... Cross Default... Status of the Notes... The Notes will be issued in such denominations as may be agreed between the Issuer and the relevant Dealer save that the minimum denomination of each Note will be such amount as may be allowed or required from time to time by the relevant central bank (or equivalent body) or any laws or regulations applicable to the relevant Specified Currency, see Certain Restrictions Notes having a maturity of less than one year above, and save that the minimum denomination of each Note (other than an Exempt Note) will be 100,000 (or, if the Notes are denominated in a currency other than euro, the equivalent amount in such currency). All payments in respect of the Notes will be made without deduction for or on account of withholding taxes imposed by any Tax Jurisdiction as provided in Condition 7. In the event that any such deduction is made, the Issuer will, save in certain limited circumstances provided in Condition 7, be required to pay additional amounts to cover the amounts so deducted. The terms of the Notes will not contain a negative pledge provision. The terms of the Notes will contain a cross default provision as further described in Condition 9(c). The Notes will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and will rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured and unsubordinated obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding, as set out in Condition 3. Rating... The Programme has been rated (P) A1 long-term and (P) P-1 short-term by Moody s. Series of Notes issued under the Programme may be rated or unrated. Where a Series of Notes is rated, such rating will be disclosed in the applicable Final Terms and will not necessarily be the same as the rating assigned to the Programme. A security rating is not a recommendation to buy, sell or hold securities and may be subject to suspension, reduction or withdrawal at any time by the assigning rating agency. Listing and Admission to Trading... This Base Prospectus, as approved and published by the Central Bank, in accordance with the requirements of the Prospectus Directive, comprises a Base Prospectus for the purposes of the Prospectus Directive and the Prospectus (Directive 2003/71/EC) Regulations 2005, and for the purpose of giving information with regard to the issue of Notes issued under this Programme, during the period of 12 months after the date hereof. Application has been made to the Irish Stock Exchange for such Notes to be admitted to the Irish Official List and to trading on the Main Securities Market. Application has also been made to the DFSA for Notes issued under the Programme during the period of 12 months from the date hereof to be admitted to the DFSA Official List and to NASDAQ Dubai for 11

14 such Notes to be admitted to trading on NASDAQ Dubai. Notes may be listed or admitted to trading, as the case may be, on other or further stock exchanges or markets agreed between the Issuer and the relevant Dealer in relation to the Series. Notes which are neither listed nor admitted to trading on any market may also be issued. The applicable Final Terms will state whether or not the relevant Notes are to be listed and/or admitted to trading and, if so, on which stock exchanges and/or markets. Governing Law... Selling Restrictions... The Notes and any non-contractual obligations arising out of or in connection with the Notes will be governed by, and construed in accordance with, English law. There are restrictions on the offer, sale and transfer of the Notes in the United States, the European Economic Area (including the United Kingdom), Japan, Hong Kong, Singapore, Thailand, the PRC, the United Arab Emirates (excluding the Dubai International Financial Centre), the Dubai International Financial Centre, the Kingdom of Saudi Arabia, the Kingdom of Bahrain and the State of Qatar and such other restrictions as may be required in connection with the offering and sale of a particular Tranche of Notes, see Subscription and Sale. 12

15 RISK FACTORS Prior to making any investment decision, prospective investors should consider carefully all of the information in this Base Prospectus, including but not limited to the risks and uncertainties described below. We believe that the factors described below represent the principal risks inherent in investing in the Notes, but our inability to repay principal, pay interest or other amounts or fulfil other obligations on or in connection with the Notes may occur for other reasons and we do not represent that the statements below regarding the risks of holding the Notes are exhaustive. The following factors are contingencies which may or may not occur and we are not in a position to express a view on the likelihood of any such contingency occurring. Any of the risks or uncertainties described below, as well as additional risks or uncertainties, including those which are not currently known to us or which we currently deem to be immaterial, may affect the Group s business, financial condition or results of operations or our ability to fulfil our obligations under the Notes. RISKS RELATING TO OUR BUSINESS Risks Relating to Our Loan Portfolio We may not be able to maintain effectively the quality of our loan portfolio. During the two years ended 31 December 2014 and 31 December 2015, we experienced continued growth in our loan balances. Our gross loans to customers increased from RMB11,026.3 billion as at 31 December 2014 to RMB11,933.5 billion as at 31 December As at 31 December 2014 and 2015, our non-performing loans (NPLs) amounted to RMB124.5 billion and RMB179.5 billion, respectively, representing NPL ratios of 1.13% and 1.50%, respectively. We cannot assure you that the quality of our existing or future loans to customers will not deteriorate. Deterioration in the overall quality of our loan portfolio or other assets may occur due to a variety of reasons, including factors beyond our control such as a slowdown in the growth of the PRC or global economies due to the recent financial crisis, a relapse of the global credit crisis, other adverse macroeconomic trends in the PRC and other parts of the world and the occurrence of natural disasters, which may adversely affect the businesses, operations or liquidity of our borrowers or their ability to repay their debt. Any significant deterioration in our asset quality may lead to increases in our NPLs and allowances made for NPLs, which may have a material adverse effect on our business, financial condition and results of operations. 13

16 We may suffer actual losses on our loan portfolio that exceed our allowances for impairment losses and the China Banking Regulatory Commission (the CBRC) may impose administrative and regulatory measures on us if our allowance to NPLs continues to fall below the ratio prescribed by the CBRC. As at 31 December 2014 and 2015, the coverage ratio of our provisions for NPLs to total NPLs was % and %, respectively. As at 31 March 2016, the Group s allowance to NPLs was %, which is below the standard basic allowance to NPLs of 150% as prescribed under the Administrative Measures for the Loan Loss Reserves of Commercial Banks issued by the CBRC (the Rules). The Rules provide that the standard basic allowance to NPLs may be adjusted by the CBRC in response to the prevailing macroeconomic environment or individually adjusted and applied to a relevant bank depending on such bank's operating conditions. In accordance with the Rules, a warning would be issued by the CBRC to a relevant bank if such allowance to NPLs were below the applicable level for three consecutive months, requesting for such bank's rectification; if such event subsists for at least six consecutive months, the CBRC may impose on the relevant bank administrative and regulatory measures as provided under the Banking Industry Supervision and Administration Law of the PRC. As at the date of this Base Prospectus, the Bank has not received any notification or official warning from the CBRC or any other relevant authority in China in relation to the current level of the Group's allowance to NPLs. The amount of our allowances for impairment losses on loans is determined based on our assessment of factors that may affect the quality of our loans. These factors include, among others, our borrowers financial conditions, their repayment ability and repayment intention, the current realisable value of any collateral, the ability of the guarantors of our borrowers to fulfil their obligations, the performance of the PRC s economy, the government s macroeconomic policies, interest rates, exchange rates and the legal and regulatory environment. Most of these factors are beyond our control. The adequacy of our allowances for impairment losses depends on the reliability of, and our skills in applying, our assessment system to estimate these losses, as well as our ability to accurately collect, process and analyse relevant statistical data. If our assessment of or expectations concerning the impact of these factors on the quality of our loans is different from actual developments or our loan quality deteriorates more than expected, then the allowances for impairment losses on loans provided by us may not be sufficient to cover actual losses. Consequently, we may need to make additional provisions for impairment losses in the future, which could lead to a decrease in our profit and materially and adversely affect our business, financial condition and results of operations. We have a concentration of loans to certain industries and customers, including loans to SMEs. As at 31 December 2014 and 2015, our corporate loans represented 69.0% and 65.9% of our total loans, respectively. As at 31 December 2015, our domestic corporate loans to the (i) manufacturing, (ii) transportation, storage and postal services, (iii) wholesale and retail, (iv) production and supply of electricity, heat, gas and water and (v) real estate industries represented approximately 21.6%, 20.7%, 10.7%, 11.3% and 6.2% respectively, of our total domestic corporate loans. We are also exposed to the real estate sector through our residential mortgage loans and corporate loans in the real estate sector. As at 31 December 2015, our residential mortgage loans represented 71.1% of our total personal loans, and our domestic branches corporate loans in the real estate sector represented 6.2% of our total domestic branch corporate loans. The PRC government has in recent years imposed macroeconomic control measures that are aimed at preventing the real estate market from over-heating, such as setting minimum down payment requirements and minimum mortgage rates on residential housing purchases, imposing business taxes on the transfer of certain residential properties and levying mandatory personal income tax for second home sales. Such measures may adversely affect the growth of our loans related to real estate. Recently, the PRC government has loosened lending policies regarding the real estate market, although such policies are subject to change. In addition, a downturn in the PRC s real estate market may materially and adversely affect the quality of our existing loans and our ability to generate new loans, which in turn could have a material adverse effect on our business, financial condition and results of operations. Moreover, our loans to small (including micro enterprises) and medium-sized enterprises (SMEs) amounted to RMB4,738.8 billion and accounted for 43.5% of our total loans as at 31 December The business operations of 14

17 SMEs may be less stable than large enterprises and more vulnerable to adverse changes in the economic environment. SMEs may also be more likely to suffer from inadequate or ineffective internal control or risk management systems. These factors may increase the credit risk of SME loans. As at 31 December 2014 and 2015, the total amount of loans granted to our single largest customer accounted for 4.8% and 4.2% respectively, of our net capital, while the total amount of loans granted to our top ten largest customers accounted for 14.9% and 13.3%, respectively, of our net capital. Any deterioration in any of the industries in which our loans are concentrated due to an adverse macroeconomic environment, government policies, overcapacity of such industries or otherwise, or any deterioration in the financial condition or results of operations of our major borrowers could materially and adversely affect the quality of our existing loans and our ability to generate new loans, which in turn could have a material adverse effect on our business, financial condition and results of operations. We are subject to risks caused by any deterioration in the debt repayment abilities of local government financing vehicles to which we extend loans or any change in national policy relating to local government financing vehicles. Loans extended to government financing vehicles in the PRC constitute part of our loan portfolio. According to the China Banking Regulatory Commission (the CBRC), local government financing vehicles (LGFVs) consist primarily of entities funded via government budget or injection of land, capital and other assets by municipal governments or their departments and institutions. These entities have independent legal person status and primarily engage in financing or investing activities in connection with public projects. These vehicles primarily engage in financing activities wholly or partially supported by the direct or indirect repayment commitments or direct or indirect guarantees of local governments and provide support to various infrastructure development and quasi-public interest government investment projects. Our loans to LGFVs are mainly made to the investment and financing vehicles of various development zones, stateowned asset management companies, land reserve companies and urban construction investment companies. Most of these loans were made to financing vehicles at a provincial and municipal level. In recent years, with the aim of reinforcing the risk management of loans to LGFVs, the PRC State Council (the State Council ), the CBRC and the PBOC, along with several other PRC regulatory authorities, have promulgated a series of notices, guidelines and other regulatory documents to direct PRC banks and other financial institutions to optimise and strengthen their risk management measures regarding their loans to LGFVs. Certain factors, such as unfavourable developments in macroeconomic conditions, changes to state policies, deterioration of the financial condition of particular local governments or other factors, may adversely affect the debt repayments of these financing vehicles, which may in turn materially and adversely affect our asset quality, financial condition and results of operations. We may not be able to maintain the growth of our loan portfolio. Our loans and advances to customers before provision have grown significantly in the past few years, increasing from RMB11,026.3 billion as at 31 December 2014 to RMB11,933.5 billion as at 31 December The growth of our loan portfolio may be affected by various factors, such as the PRC s macroeconomic policies and capital constraints. In the future, the growth rate of our loan portfolio may slow, or the balance of our loan portfolio may even decline. In addition, in response to constraints on our regulatory capital, we may adopt strategies to reduce our reliance on our loan portfolio and expand our activities in other businesses that require relatively lower capital. Any of the foregoing factors could impact the growth of our loan portfolio and thereby materially and adversely affect our business, financial condition and results of operations. 15

18 We may not be able to maintain the growth rate of our retail banking business. As a leading commercial bank in the PRC, we may not be able to maintain our competitive position or sustain our growth rate due to increasing market saturation and competition, changes in government regulations in the banking industry in the PRC and other factors, any of which may adversely affect our business, financial condition and results of operations. For example, on 26 February 2013, the State Council promulgated the Notice of the General Office of the State Council on Continuing Regulation and Control of Real Estate Market ( 國務院辦公廳關於繼續做好房地產市場調控工作的通知 ), which requires banking institutions to implement differentiated housing credit policies, further implement the policy of down payment ratio and mortgage rate for first-time house buyers and tighten the credit policies for buyers of second or additional homes, and imposes a personal income tax on the profit generated from sale of residential property. Such measures may slow down the development of the residential real estate market in the PRC, hinder an increase in residential mortgages and reduce the average amount of residential mortgages, and thus have a material adverse impact on our retail banking business. On 29 September 2014, the PBOC and the CBRC jointly promulgated the Notice on Further Improving Financial Services for Housing ( 關於進一步做好住房金融服務工作的通知 ), which allows households owning only one residential property and having paid all mortgages on such property to enjoy the benefit of first time home buyers under certain circumstances. However, such policies are subject to further change and implementation by banks in the PRC. The rapid expansion of our retail banking business also increases our exposure to changes in economic conditions affecting Chinese consumers. For example, a slowdown in the PRC s economic development could adversely affect the ability of retail borrowers and credit card holders to make payments, thereby increasing the probability of defaults and reducing the demand for retail loans and credit cards. Such a slowdown may also reduce the demand for our non-interest-based products and services, which could result in a reduction in, among others, our credit card transaction volumes and sales of investment products. Accordingly, economic difficulties in the PRC that have a material adverse effect on PRC consumers could materially and adversely affect our business, financial condition and results of operations. Our loan classification and provisioning policies may be different in certain respects from those applicable to banks in certain other countries or regions. We classify our loans using a five-tier classification system in accordance with the guidelines set forth by the PRC regulators. The five tiers are pass, special mention, substandard, doubtful and loss. We assess our impairment losses on loans and determine a level of allowances for impairment losses using the five-tier classification system. We perform such assessment, determination and recognition using the concept of impairment under International Accounting Standards (IAS) 39. Our loan classification and provisioning policies may be different in certain respects from those of banks incorporated in certain other countries or regions. As a result, our loan classifications as well as our allowances for impairment losses, as determined under our loan classification and provisioning policies, may differ from those that would be reported by banks incorporated in other countries or regions. The replacement of IAS 39 with IFRS 9 may require us to change our provisioning practice. We currently assess our loans and investment assets for impairment under IAS 39. On 24 July 2014, the International Accounting Standards Board issued the final version of IFRS 9, which shall replace IAS 39 in its entirety. IFRS 9 replaces the incurred loss model under IAS 39 with an expected loss model. The new standard has a mandatory effective date of 1 January 2018 but may be adopted earlier. We have started the process of evaluating the potential effect of IFRS 9 on our financial reporting, but this evaluation is still in progress and not yet completed. Given the nature of our operations, IFRS 9 is expected to have a significant impact on our financial statements and as a result may materially and adversely affect our financial condition and results of operations. 16

19 The collateral or guarantees securing our loans may not be sufficient, or we may be unable to realise the full value of the collateral or guarantees in a timely manner or at all. A significant portion of our loans is secured by collateral or guarantees. As at 31 December 2015, 46.1% and 12.6% of our total loans were secured by mortgages and pledges, respectively, and 13.8% of our total loans were secured by guarantees. The pledged collateral securing our loans includes, among others, bond and equity securities. The mortgages securing our loans primarily comprise real properties and other assets. The value of the collateral securing our loans may significantly fluctuate or decline due to factors beyond our control, including macroeconomic factors affecting the economy of the PRC. For example, a downturn in the PRC s real estate market may result in a decline in the value of the real properties securing our loans to levels significantly below the outstanding principal and interest balances of such loans. Any decline in the value of such collateral may reduce the amounts we can recover from such collateral and increase our impairment losses. We may not have updated valuations of such collateral, which may adversely affect the accuracy of our assessment of our loans secured by such collateral. Some of the guarantees securing our loans are provided by the borrowers affiliates or third parties. Some of such loans and advances are not backed by collateral other than guarantees. A significant deterioration in the financial condition of a guarantor could significantly decrease the amounts we may recover under such guarantees. Moreover, we are subject to the risk that a court or other judicial or government authority may declare a guarantee to be invalid or otherwise decline or fail to enforce such guarantees. We are therefore exposed to the risk that we may not be able to recover all or any part of the amounts guaranteed in respect of our loans. In the PRC, the procedures for liquidating or otherwise realising the value of non-cash collateral may be protracted, and it may be difficult to enforce claims in respect of such collateral. As a result, it may be difficult and timeconsuming for us to take control of or liquidate the collateral securing NPLs. If the value of our collateral decreases to a level that is insufficient to cover the outstanding amounts of loans, or if we are unable to realise the full value of the collateral and guarantees securing our loans on a timely basis, it may materially and adversely affect our asset quality, financial condition and results of operations. Other Risks Relating to Our Business We are subject to interest rate risk. Similar to most PRC commercial banks, our results of operation depend to a large extent on our net interest income, which represented 77.7% and 75.9% of our operating income for the years ended 31 December 2014 and 2015, respectively. Our net interest income is sensitive to adjustments in the benchmark interest rates set by the PBOC. The PBOC publishes and adjusts benchmark interest rates on loans and deposits from time to time. For example, since November 2014, the PBOC lowered the benchmark interest rates on RMB-denominated loans and deposits six times. Moreover, the upper limit of the interest rate floating range was removed by the PBOC on 24 October On the other hand, the PBOC continues to liberalise the restrictions on interest rates for loans. For example, on 20 July 2013, the PBOC eliminated the minimum interest rate requirements for RMB-denominated loans. The PBOC may further liberalise the existing interest rate restrictions in the future. If the existing regulations were substantially liberalised or eliminated, loan-deposit spreads in the PRC banking industry may further narrow due to market competition, which may materially reduce our net interest income. Furthermore, we cannot assure you that we will be able to diversify our businesses and adjust the composition of our asset and liability portfolios and our pricing mechanism to enable us to effectively respond to the further liberalisation of interest rates. In addition, adjustments made by the PBOC to the benchmark interest rates on loans or deposits, or any changes in market interest rates, may negatively impact our financial condition and results of operations. For example, changes 17

20 in the PBOC benchmark interest rates could affect the average yield on our interest-earning assets and the average cost on our interest-bearing liabilities to different extents and may narrow our net interest margin, leading to a reduction in our net interest income. In addition, an increase in interest rates for loans could result in increases in the financing costs of our customers, reduce overall demand for loans and increase the risk of customer default, while a reduction in interest rates for deposits could cause our depositors to withdraw their funds from our Bank. We are also engaged in trading and investment activities involving some financial instruments in the domestic market. As the derivatives market has yet to develop in the PRC, risk management tools available to us for hedging market risks are limited. Income from these activities may fluctuate due to, among other things, changes in interest rates and foreign currency exchange rates. For example, increases in interest rates will cause the value of our fixedrate securities to decrease, which may materially and adversely affect our results of operations and financial condition. We are subject to currency risk. We are subject to currency risk arising from losses incurred due to unfavourable exchange rate fluctuations on our foreign exchange exposures resulting from the unmatched currency structure between foreign currency-denominated assets and foreign currency-denominated liabilities. The value of the Renminbi against the U.S. dollar and other currencies fluctuates and is affected by, among other factors, changes in the PRC s and international political and economic conditions. Since 1994, the conversion of Renminbi into foreign currencies, including Hong Kong and U.S. dollars, has been based on rates set by the PBOC. On 21 July 2005, the PRC government adopted a more flexible managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band that is based on market supply and demand and reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by approximately 2% against the U.S. dollar. In August 2008, the PRC announced a further change in its exchange regime to a managed floating exchange rate regime based on market supply and demand. Since the Renminbi foreign exchange rate reform beginning on 21 July 2005, the PBOC has adjusted the daily floating band of the Renminbi trading prices against the U.S. dollar in the inter-bank spot foreign exchange market three times: effective from 21 July 2007, the daily floating band of the Renminbi trading prices against the U.S. dollar was expanded from 0.3% to 0.5%; effective from 16 April 2012, such floating band was further expanded to 1%; and effective from 17 March 2014, such floating band was further expanded to 2%. In August 2015, the PRC government thrice lowered the daily mid-point trading price of the Renminbi against the U.S. dollar, which was the most significant downward adjustment of the Renminbi in more than a decade. The PRC government may make further adjustments to the exchange rate system in the future. Any appreciation of Renminbi against the U.S. dollar or any other foreign currency may result in a decrease in the value of our foreign currency-denominated assets. Conversely, any devaluation of Renminbi may adversely affect the value of our assets in Renminbi terms. We are subject to liquidity risk. Customer deposits have historically been our main source of funding. As at 31 December 2015, 48.5% of our total customer deposits were demand deposits. If a substantial portion of our depositors withdraw their demand deposits or do not roll over their time deposits upon maturity, we may need to pay higher costs to obtain alternative sources of funding to meet our funding requirements. Our ability to obtain additional sources of funding may be affected by factors such as deterioration of market conditions and disruptions to financial markets. We may not be able to secure required funding on commercially acceptable terms on a timely basis or at all, which could result in liquidity risk and materially and adversely affect our business, financial condition and results of operations. In addition, we rely on the inter-bank money market to obtain a portion of our funding, including the portion of funds that are used to manage our liquidity. Any fluctuation in liquidity or funding costs on the inter-bank money market, including as a result of a financial or other crisis or changes in the PBOC s policies or practices affecting 18

21 the liquidity of other banking institutions, may materially and adversely affect our ability to fund our business and manage our liquidity through the inter-bank money market. We are subject to risks related to the expansion of our products, services and business scope. In recent years, we have actively developed a number of new products and expanded the scope of our services, including, among others, investment banking, asset management, insurance and financial leasing. We are exposed to a number of risks in connection with our expansion. For example, we may not be able to develop successfully our new businesses due to our limited experience in a particular product or service; the anticipated market demand for our new products or services may not materialise; we may not successfully hire or retain personnel who have the relevant skills and experience; and regulators may revoke or withhold their approval for any products and services that we have offered or plan to offer. As a result, the return on our new products, services or businesses may be less, or realised later, than expected, which may materially and adversely affect our business, financial condition and results of operations. We have expanded our business into jurisdictions other than the PRC, which has increased the complexity of the risks that we face. In recent years, we have taken actions to expand our international operations. As at 31 December 2015, we had 404 overseas institutions in 42 countries and regions and had established correspondent relationships with 1,611 overseas banks in 147 countries and regions, with a service network covering Asia, Africa, Latin America, Europe, North America and Australia as well as major international financial centres. Our expansion into jurisdictions outside of the PRC subjects us to new regulatory and operational challenges and risks and has also increased the complexity of our risks in a number of areas, including currency risk, interest rate risk, regulatory and compliance risk, reputational risk and operational risk. The loan portfolio of our international branches includes foreign currency-denominated loans to Chinese companies engaged in international trade. This exposes us to additional risks including default risk resulting from a failure in the performance of the import or export agreements by any party, trade protectionist measures or other factors, and our inexperience in various aspects of the economic and legal framework in overseas markets. Adverse market conditions in these international jurisdictions may result in mark-to-market and realised losses on the investment assets held by our overseas branches and increase their cost of funding. Furthermore, despite our best efforts to comply with all applicable regulations in the jurisdictions in which we operate, there may be incidences of our failure to comply with the regulations in certain jurisdictions. Regulators in these jurisdictions may have the power to bring administrative or judicial proceedings against us or our employees, representatives, agents and third-party service providers, which could result in, among others, suspension or revocation of one or more of our licenses, cease and desist orders, fines, civil penalties, criminal penalties or other disciplinary actions. In addition, the volatility in the global economic and financial systems in recent years has led and may in the future lead to significant regulatory changes in various jurisdictions, including those in which we have operations. These changes may include those with respect to capital and liquidity ratios, cross-border capital flows and consumer protection. The extent and impact of such changes is difficult to anticipate and estimate, and such changes could have an adverse impact on our growth, capital adequacy and profitability. If we are unable to manage the risks resulting from our international expansion, our business, financial condition and results of operations may be materially and adversely affected. We have been increasingly focused on the development of wealth management products in recent years, and we are subject to risks relating to adverse developments or changes in regulatory policies relating to these products. In recent years, growth of deposits in the PRC banking industry has begun to slow as progress has been made in terms of interest rate liberalisation, financial disintermediation and financing channel expansion. In response to such developments, PRC commercial banks, including the Group, provide wealth management and other financial 19

22 services through their wealth management businesses. As at 31 December 2015, the outstanding balance of our principal guaranteed wealth management products amounted to RMB205.5 billion, representing 0.93%, respectively, of our total assets. Our wealth management products primarily represent investments in, among others, bonds, deposits and highly liquid money market investment instruments, other debt instruments, equity instruments and other types of assets that are compliant with regulatory requirements. As most of the wealth management products issued by us are nonprincipal protected products, we are not liable for any loss suffered by investors in these products. However, to the extent investors suffer losses on these wealth management products, our reputation may be severely damaged, and we may also suffer a loss of business, customer deposits and net income. Furthermore, we may eventually bear losses for non-principal protected products if the investors bring lawsuits against us and the court decides that we are liable for mis-selling such products or otherwise. In addition, the tenors of wealth management products issued by us are often shorter than those of the underlying assets. This mismatch subjects us to liquidity risk and requires us to issue new wealth management products, sell the underlying assets or otherwise address the funding gap when existing wealth management products mature. PRC regulatory authorities have introduced regulatory policies to restrict the scale of PRC commercial banks investments in non-standard debt-based assets with funds raised from wealth management products. If PRC regulatory authorities further restrict the wealth management business of PRC commercial banks, it could materially and adversely affect our business, financial condition and results of operations. We are subject to risks associated with off-balance sheet credit commitments and guarantees. Our off-balance sheet credit commitments and financial guarantees primarily consist of, inter alia, bank acceptances, loan commitments, guarantees and letters of credit. As at 31 December 2015, our credit risk-weighted assets of credit commitments was RMB1,071.2 billion, and our off-balance sheet commitments amounted to RMB2,297.9 billion. We are exposed to credit risk related to such credit commitments and guarantees. If our customers cannot perform their obligations, we will need to fulfil the related commitments and guarantees. In addition, if we cannot obtain compensation from relevant customers, our business, financial condition and results of operations may be materially and adversely affected. We are subject to risks associated with our risk management and internal control policies and procedures. We have been proactively implementing our risk management system and improving our risk management and internal control capabilities. Nonetheless, our risk management and internal control capabilities are limited by the information and risk management tools or technologies available to us. Our ability to implement and maintain strict internal control may be affected by our expansion in business scale and business scope. We cannot assure you that all of our employees will always comply with our internal control policies and procedures. If there are any deficiencies in our risk management and internal control policies and procedures, we may be subject to credit risk, liquidity risk, market risk, operational risk or reputational risk, which may materially and adversely affect our business, financial condition and results of operations. We are subject to operational risks and risks relating to our information technology systems. We are subject to operational risks such as internal and external fraud, risks related to customers, products and business activities, execution risks, closing and process management risks, employment system and workplace safety, damage to physical assets and risks related to information technology systems. We have established a series of policies and procedures to identify, assess, monitor, manage and report operational risks according to the Guidance to the Operational Risk Management of Commercial Banks ( 商業銀行操作風險管理指引 ) issued by the CBRC. Operational risks may cause losses to us if these measures are not put in place effectively or do not adequately cover all aspects of our operations. 20

23 We depend on our information technology systems to process accurately a large number of transactions on a timely basis and to store and process most of our data regarding our business and operations. We have adopted a number of technical measures and management initiatives to ensure the secure and reliable operation of our information systems. We have also proactively developed information security protection initiatives. If a portion or all of our information technology systems malfunction due to any defect in software or hardware or any deficiency in our information security protection, or we fail to effectively improve or upgrade our information technology systems on a timely basis, our business, financial condition and results of operations could be materially and adversely affected. We may not be able to prevent fully or to detect timely any money laundering and other illegal or improper activities. We are required to comply with applicable laws and regulations relating to anti-money laundering and anti-terrorism in the PRC and other jurisdictions where we operate. We are not currently aware of any money laundering or other major illegal or improper activities engaged in by or involving any employee of our domestic or overseas branches which may materially and adversely affect our business, financial condition and results of operations. However, we cannot assure you such activities will not take place in the future or that we can completely eradicate money laundering activities, activities carried out by terrorists and terrorist-related organisations or other improper activities carried out by organisations or individuals through the Group. If we fail to timely detect and prevent money laundering activities or other illegal or improper activities, relevant regulatory agencies will have the power and authority to impose sanctions on us, which may materially and adversely affect our business, financial condition and results of operations. We may not be able to detect and prevent all fraud or other misconduct committed by our employees or third parties. We have continued to strengthen the detection and prevention of fraud or other misconduct committed by our employees or third parties. However, we cannot assure you that our internal control policies and procedures will completely and effectively prevent all fraud or other misconduct committed by our employees or third parties. Any fraud or misconduct involving us or our employees may adversely affect our business, financial condition and results of operations. We are subject to risks related to property title certificates or other licenses and certificates. We own and lease properties in the PRC. For some of the properties we own, we have not obtained building ownership certificates, state-owned land use right certificates or both. For some of the properties we lease, the lessors have not provided us with the relevant title certificates of the property and/or consent letters from the relevant property owners to sublease. Even though we have been provided with written undertakings for some leased properties indicating that the lessors will compensate our potential loss due to defects in relevant property title certificates or the relevant lease agreements contain such undertakings, if we have to relocate our branches or sub-branches due to title defects with regard to properties owned or leased by us, we will incur additional costs relating to such relocation. In addition, a small number of our branches are currently in the process of applying for new financial licenses, business licenses and/or other licenses due to license renewal requirements, upgrades of branch offices, changes of name, relocation or changes of business nature. Any failures to receive such licences or delays may have an adverse effect on our business and operations. We or our customers may be subject to OFAC or other penalties if we are determined to have violated any OFAC regulations or similar sanctions. The United States imposes a range of economic sanctions against certain foreign countries, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. The U.S. sanctions are intended to advance certain U.S. foreign policy and national interests, such as discouraging 21

24 certain countries from acquiring weapons of mass destruction or engaging in human rights abuses. The U.S. Department of the Treasury s Office of Foreign Assets Control (OFAC) is the principal government agency charged with administering and enforcing U.S. economic sanctions programmes. These economic sanctions, as administered by OFAC, generally apply to U.S. entities and, in certain cases, to foreign affiliates of U.S. entities, or to transactions that involve, in some manner, U.S. products or otherwise come within the jurisdiction of the United States. Other governments and international or regional organisations also administer similar economic sanctions. If our New York branch or any of our overseas branches engages in any prohibited transactions by any means, or if it is otherwise determined that any of our transactions violated OFAC-administered or other sanctions regulations, we could be subject to penalties, and our reputation and ability to conduct future business in the United States or with U.S. entities, or in other affected jurisdictions, could be affected, which may materially and adversely affect our business, financial condition and results of operations. We are exposed to risks in relation to the bonds issued by Huarong in connection with an extraordinary disposal of certain NPLs. During the period from 1999 to 2001, we disposed of non-performing assets with a book value of RMB407.7 billion to China Huarong Asset Management Corporation (Huarong) and received 10-year non-transferrable bonds issued by Huarong with a nominal value of RMB313.0 billion (the Huarong Bonds) as well as RMB94.7 billion in cash as consideration. Huarong is a wholly state-owned non-bank financial institution that has been approved by the State Council and was established in October 1999 primarily to acquire and manage non-performing assets from our Bank. The Huarong Bonds have a fixed interest rate of 2.25% per annum. Huarong has paid interest on the bonds to us in a timely manner in the past pursuant to the terms of the bonds. In addition, the Ministry of Finance (the MOF) issued a notice on 14 June 2005 to the effect that: (1) with effect from 1 July 2005, in the event of any failure of Huarong to pay for the interest on the bonds in full to us, the MOF will provide financial support; and (2) if necessary, the MOF will provide support for the payment of the principal of the bonds issued by Huarong. During the period from 2010 to 2011, the Huarong Bonds held by us matured. In accordance with the Letter from MOF in Respect of the Bonds Issued by Huarong held by Industrial and Commercial Bank of China (Cai Jin Han [2010] No. 105), the MOF agreed that the term of the Huarong Bonds held by us would be extended for 10 years after their expiration, the terms of the bonds such as the interest rate would remain unchanged and the MOF would continue its support for the principal and interest payments in relation to the Huarong Bonds held by us. Given the MOF s sovereign credit rating, we believe the recoverability of the bonds issued by Huarong can be reasonably guaranteed. As at 31 December 2015, we received early repayment of RMB204.8billion accumulated under the Huarong Bonds. As at 31 December 2015, we held a series of long term bonds issued by Huarong with an aggregate amount of RMB108.2 billion. In consideration of the various investment channels and market returns currently available in the market, there is a certain level of opportunity cost borne by our holding the Huarong Bonds. However, given the large investment size and long investment term of the bonds, if the principal of the Huarong Bonds were to be reallocated, it would be difficult to allocate all the capital to long-term loans. We would only be able to allocate to non-credit assets, with the investment returns limited by the size of the Renminbi bond market. Therefore, we believe the opportunity cost of holding the Huarong Bonds has a relatively small impact on our operations. The Huarong Bonds are financial bonds placed to us with the approval of the PBOC and were specifically issued for Huarong s acquisition of certain of our non-performing assets. There are no similar bonds in the open bond market, and there is no active market for such bonds. In accordance with the accounting standards applicable to us, due to the lack of available valuation information and an active market and the fixed repayment amounts, we classify the Huarong Bonds as receivables relating to bonds investment and measure them at amortised cost using the effective interest method. Given that the interest on each payment term of the Huarong Bonds has been paid in full and in a timely manner, and that the MOF has provided its support for the principal and interest payment in relation to the Huarong Bonds, there is no event of impairment of financial assets under the applicable accounting standards. As such, we are of the view that the determination of the fair value of the renewed Huarong Bonds at initial recognition met the relevant requirements under the applicable accounting standards. The replacement of the original Huarong 22

25 Bonds by the renewed Huarong Bonds did not result in a loss on derecognition or an impairment in our financial statements. We expect that the MOF will perform its obligations as set out in the notices when necessary. However, due to the absence of any precedent for requesting the fulfilment of, or otherwise resorting to other legal procedures to seek the enforcement of, similar undertakings by the MOF or other PRC government authorities, we cannot guarantee any enforcement of such notices by operation of law. In the event of any failure of Huarong to discharge any of its payment obligations relating to such bonds or of the obligations of the MOF in such notices to be enforced by operation of law, our business, financial condition and results of operations may be materially and adversely affected. We are exposed to risks relating to bonds issued by Huijin. As at 31 March 2016, Central Huijin Investment Ltd. (Huijin) held approximately 34.71% of our total combined H Shares and domestic-listed shares (the A Shares, and together with the H Shares, the Ordinary Shares). In August and September 2010, Huijin issued the Central Huijin Investment Ltd. bonds (the Huijin Bonds) in the national inter-bank bond market. The MOF has issued the Letter on the Issues of the Issuance of Renminbi Bonds in an Amount of RMB187.5 billion by Central Huijin Investment Ltd. (Cai Ban Jin [2010] No. 60) to Huijin, pursuant to which the MOF confirmed that the issuance of the RMB187.5 billion Renminbi bonds by Huijin was made based on the decision of the State Council for the purpose of making a capital contribution to The Export-Import Bank of China and China Export & Credit Insurance Corporation and participating in the fund raising activities of our Bank, Bank of China Limited and China Construction Bank Corporation on behalf of the State. The CBRC has issued the Letter of Approval from the CBRC on Matters in respect of the Issuance of Renminbi Bonds by Central Huijin Investment Ltd. (Yin Jian Han [2010] No. 285), pursuant to which the CBRC confirmed its treatment of the Huijin Bonds as policy financial bonds, and the risk weight associated with the investment in such bonds by commercial banks is zero. Huijin, on behalf of the State, will use the proceeds raised from such issuance for the purpose of making capital contributions to The Export-Import Bank of China and China Export & Credit Insurance Corporation and supplementing the capital of our Bank, Bank of China Limited and China Construction Bank Corporation. We subscribed for the Huijin Bonds by way of tender in the open market. As at 31 December 2015, the Bank held an amount of RMB16.91 billion face value of Huijin Bonds, for a term from three years to 30 years with an interest rate between 3.16% and 4.20% per annum. In the event of any failure of Huijin to discharge any of its payment obligations relating to such bonds or of the obligations in such notices to be enforced by operation of law, our business, financial condition and results of operations may be materially and adversely affected. We are subject to reputational risks related to our business operations. With the rapid development of the financial industry and changes in media communication, the public is paying increasing attention to the banking industry, resulting in easier and more frequent access to rumours related to banks services quality, their operations and management and compliance issues. Such coverage may lead to negative feedback from depositors, investors and other Shareholders, which may adversely affect our normal operations and management, and could adversely affect our liquidity if such negative coverage leads to depositors and other banks withdrawing their funds or refusing to lend to us. Within the banking industry, the banks have close interbank relationships with one another, and interbank deposits and lending are relatively common. If a bank does not operate properly or becomes insolvent, a chain reaction may occur, which may trigger a confidence crisis towards the whole banking industry, and materially and adversely affect our financial condition and results of operations. 23

26 We are subject to counterparty risks in our derivative transactions. We act primarily as an intermediary in domestic and international foreign exchange and derivative markets, and we currently have exchange rate contracts, interest rate contracts and commodity derivatives contracts with a number of domestic and international banks, financial institutions and other entities. As a result, we are subject to credit risk from our various counterparties. As at 31 December 2015, the notional amount of our outstanding derivative financial instruments amounted to RMB5,881.7 billion, and the fair value of our outstanding derivative assets and liabilities amounted to RMB78.9 billion and RMB76.8 billion, respectively. Although we cautiously evaluate the credit risks from our counterparties in our derivative transactions and believe that the overall credit quality of our counterparties is adequate, there can be no assurance that parties with significant risk exposure will not have difficulty in fulfilling derivative contracts that may cause losses for us. Due to restrictions in certain PRC regulations, our investments are concentrated in certain types of investment products. We may experience significant decreases in the value of a particular type of investment. As a result of current PRC regulatory restrictions, substantially all of our RMB-denominated investment assets are concentrated in a limited number of investments permitted for PRC commercial banks, such as PRC government bonds, bills and open market instruments issued by the PBOC, bonds issued by PRC policy banks and credit products issued by PRC financial and non-financial institutions (including bonds and subordinated notes issued by PRC commercial banks and insurance companies). These restrictions limit our ability to diversify our investment portfolio and seek higher returns by making investments comparable with those of banks in other countries as well as our ability to manage our liquidity in the same manner as banks in other countries. In addition, we are exposed to a certain level of risk as a result of the concentration of our RMB-denominated fixed income securities investments. For example, fluctuation in interest rates or deterioration of the financial condition of the issuers of such fixed income securities may cause their value to decrease. A decrease in the value of any of these types of investments could have a material adverse effect on our business, financial condition and results of operations. The banking industry is subject to extensive regulation, which is undergoing major changes that will impact our business. Like other major banks, we are subject to extensive regulation by regulators and exchanges in each of the major markets where we conduct our business. These laws and regulations significantly affect the way we do business and can restrict the scope of our existing businesses and limit our ability to expand our product offerings and pursue certain investments. In response to the financial crisis, legislators and regulators around the world have adopted, continue to propose and are in the process of adopting, finalising and implementing a wide range of financial market reforms that are resulting in major changes to the way our global operations are regulated and conducted. In particular, as a result of these reforms, we are, or will become, subject to (among other things) significantly revised and expanded regulation and supervision, more intensive scrutiny of our businesses and any plans for expansion of those businesses, new activities limitations, a systemic risk regime that imposes heightened capital and liquidity requirements and other enhanced prudential standards, new resolution regimes and resolution planning requirements, new restrictions on activities and investments imposed by Section 619 of the Dodd-Frank Act (such statutory provision together with such implementing regulations, the Volcker Rule), and comprehensive new derivatives regulation. While certain portions of these reforms are in force, others are still subject to final rulemaking or transition periods. Many of the changes required by these reforms could materially impact the profitability of our businesses and the value of assets we hold, expose us to additional costs, require changes to business practices or force us to discontinue businesses, adversely affect our ability to pay dividends and repurchase our stock, or require us to raise capital, including in ways that may adversely impact our shareholders or creditors. In addition, regulatory requirements that are being proposed by foreign policymakers and regulators may be inconsistent or conflict with regulations that we are subject to in the U.S. and, if adopted, may adversely affect us. While there continues to be uncertainty about the full impact of these changes, we are and will continue to be subject to a more complex regulatory framework, and will incur 24

27 costs to comply with new requirements as well as to monitor for compliance in the future. For example, the Volcker Rule provisions of the Dodd-Frank Act will have an impact on us, including potentially limiting various aspects of our business. RISKS RELATING TO THE PRC BANKING INDUSTRY Our business is inherently subject to market fluctuations and general economic conditions, particularly in the PRC. Our business is inherently subject to global capital market fluctuations and general economic conditions. Global market factors, including economic growth rates, inflation, deflation, interest rates, credit spreads, equity prices, real estate markets, energy prices, foreign currency exchange rates, consumer spending, business investment, government spending and the volatility and strength of the capital markets all affect the business and economic environment and, ultimately, the amount and profitability of our business. In particular, uncertain economic conditions, volatility and disruptions in global capital markets, such as those that occurred in late 2008 and 2009 during the global financial crisis, can have a material adverse effect on the Group. The economic recovery since the global financial crisis has been slow, with economic growth rates in major economies such as Europe, the United States, Japan and the PRC generally remaining persistently lower than precrisis levels. Moreover, there are on-going concerns about European sovereign debt levels and the consequences for economic growth and investor confidence in the Eurozone, political gridlock in the United States over government spending and debt levels and the consequences for economic growth and investor confidence in the United States, and the possible tapering of the U.S. Federal Reserve s quantitative easing programme. Uncertainties in the global and the PRC s economies may adversely affect our business, financial condition and results of operations in many ways, including, among others: during a period of economic slowdown, there is a greater likelihood that more of our customers or counterparties could become delinquent in respect of their loan repayments or other obligations to us, which, in turn, could result in a higher level of NPLs, allowances for impairment losses and write-offs; the increased regulation and supervision by the financial services industry in response to the financial crisis in certain jurisdictions where we operate may restrict our business flexibility and increase our compliance costs; the value of our investments in the equity and debt securities issued by overseas governments and financial institutions may significantly decline; our ability to raise additional capital on favourable terms, or at all, could be adversely affected; and trade and capital flows may further contract as a result of protectionist measures being introduced in certain markets, which could cause a further slowdown in economies and adversely affect our business prospects. Any potential market and economic downturns, economic slowdown or geopolitical uncertainties in the PRC, its neighbouring countries or regions or the rest of the world may exacerbate the risks relating to the PRC capital markets. In addition, global economic uncertainty and the slowdown in PRC economic growth have precipitated, and may continue to raise the possibility of, fiscal, monetary, regulatory and other governmental actions. We cannot predict whether or when such actions may occur, nor can we predict what ultimate impact, if any, such actions or any other governmental actions could have on our business, results of operations and financial condition. There can be no assurance that the PRC s economy or the global economy will continue to improve or maintain sustainable growth. If further economic downturn occurs or continues, our business, financial condition and results of operations could be materially and adversely affected. 25

28 We face increasingly intense competition in the PRC s banking industry and competition from other investment and financing channels. The banking industry in the PRC is becoming increasingly competitive. We face competition from commercial banks in all of our principal areas of business where we have operations. On 1 July 2013, the General Office of the State Council of the PRC issued the Guidance Letter regarding Financial Support for Promoting Economic Restructuring and Transformation ( 國務院辦公廳關於金融支持經濟結構調整和轉型升級的指導意見 ) (the Guidance Letter). The Guidance Letter, among others, encourages investment by private-sector capital in financial institutions and the establishment of privately owned banks. The Guidance Letter provides a policy direction to the increasing involvement of private-sector capital in the financial industry in the PRC. We may face increasing competition from privately owned banks in the future. We compete with our competitors for substantially the same loan, deposit and fee and commission-based products and services customers. Such competition may materially and adversely affect our business and future prospects by, for example, reducing our market share in our principal products and services, reducing our fee and commission income, affecting the growth of our loan or deposit portfolios and their related products and services and increasing competition for soliciting senior management talent and qualified professional personnel. In addition, we may face competition from direct corporate financing, such as the issuance of securities in the domestic and international capital markets. The domestic securities markets have experienced, and are expected to continue to experience, expansion and growth. If a substantial number of our customers choose alternative ways of financing to fund their capital needs, this may adversely affect our interest income, which could in turn materially and adversely affect our business, financial condition and results of operations. In addition to competition from other banks and financial institutions, we also face competition from other forms of investment alternatives in the PRC. In recent years, financial disintermediation, which involves the movement of funds by investors from intermediary financial institutions such as savings and deposit-taking banks to direct investments, has increased in the PRC. Our deposit customers may elect to convert their funds into stocks, bonds and wealth management products, which may result in a decrease in our customer deposits, therefore further affecting the level of funds available to us for our lending business to generate net interest income. Meanwhile, financial disintermediation may result in a decrease in the enterprise demand for loans, which could materially and adversely affect our business, financial condition and results of operations. We are subject to risks related to uncertain changes in the regulatory environment of the PRC s banking industry. Our businesses are directly affected by changes in the PRC s banking regulatory policies, laws and regulations. The regulatory system and the laws and regulations governing the banking sector are subject to future changes, and we cannot assure you that such changes will not materially and adversely affect our business, financial condition and results of operations. In addition, our overseas branches, subsidiaries and representative offices have to comply with the local laws and regulations of the relevant jurisdiction and are subject to regulation and approval by the local regulatory authorities in the relevant jurisdiction. We cannot assure you that our overseas branches, subsidiaries and representative offices can always satisfy applicable laws and regulatory requirements. If we do not meet such requirements, our business in the relevant jurisdiction may be affected, which may materially and adversely affect our business, financial condition and results of operations. We are subject to risks related to changes in monetary policy. PRC monetary policy is set by the PBOC in accordance with the macroeconomic environment. In addition, the PBOC controls monetary supply through open market operations and adjustments to the deposit reserve ratio and rediscount rate in order to achieve targeted control over the economy. As commercial banks are a major means to 26

29 implement monetary policy, changes in monetary policy will affect their operations and profitability. If we cannot timely adjust our operating strategy in response to the changes in monetary policy, our business, financial condition and results of operations may be materially and adversely affected. We cannot provide assurance that we will be able to satisfy the capital adequacy requirements of the CBRC or as a G-SIB pursuant to Basel III, and we are subject to risks related to potential Capital Adequacy Ratio fluctuations. On 16 December 2010 and on 13 January 2011, the Basel Committee on Banking Supervision issued the final text and guidance on a number of fundamental reforms to the regulatory capital framework (such reforms being commonly referred to as Basel III). Following the issuance of Basel III, on 27 April 2011, the CBRC issued new guidelines setting more stringent capital adequacy, leverage, liquidity and loan loss provisioning requirements for PRC banks in accordance with the reform of the PRC s banking industry and the related regulatory framework. On 7 June 2012, the CBRC further issued the Capital Management Rules, which established a unified and comprehensive regulatory system for capital adequacy, re-defined the term capital, expanded the scope of capital risk coverage and set forth different regulatory requirements for commercial banks with different capital adequacy levels, including the categorisation of regulatory requirements on capital into four levels. The first level requirements are the lowest, under which the requirements for Core Tier 1 Capital Adequacy Ratio, Tier 1 Capital Adequacy Ratio and Capital Adequacy Ratio (each as defined in the Capital Management Rules) are set at 5%, 6% and 8%, respectively; the second level requirements set the requirements for reserve capital and counter-cyclical capital at 2.5% and 0% 2.5%, respectively; the third level sets the requirement for systemically important institutions at 1%; and the fourth level requirement is in relation to the criteria for the second pillar capital. In addition, the Capital Management Rules set forth a new method for calculating the Capital Adequacy Ratio and provided a transition period for PRC commercial banks to meet their capital adequacy requirements. The Capital Management Rules became effective on 1 January Pursuant to the Notice of Interim Arrangement for Implementation of the Administrative Measures for the Capital of Commercial Banks of the PRC (Provisional) ( 中國銀監會關於實施 商業銀行資本管理辦法 ( 試行 ) 過渡期安排相關事項的通知 ), the CBRC encouraged commercial banks that had satisfied the capital adequacy requirements in the Capital Management Rules before the end of 2012 to continue to meet such requirements during the transition period, and the commercial banks that had failed to meet such requirements by the end of 2012 to improve gradually their capital adequacy during the transition period by satisfying the year-by-year capital adequacy requirements. Furthermore, the Financial Stability Board identified us as a globally systemically important bank (G-SIB) on 11 November As a G-SIB, we are required to satisfy heightened capital adequacy ratios pursuant to Basel III. As at 31 December 2015, our Core Tier 1 Capital Adequacy Ratio, Tier 1 Capital Adequacy Ratio and Capital Adequacy Ratio, as calculated in accordance with the Capital Management Rules, were 12.87%, 13.48% and 15.22%, respectively, and satisfied applicable regulatory requirements. We aim to maintain a stable and reasonable capital adequacy level in order to support the implementation of our business development and strategic planning. However, certain adverse changes may lead to fluctuations in our Capital Adequacy Ratio. Such adverse changes include, but are not limited to, an increase of risk weighted assets due to rapid business expansion, an increase of capital-deducting equity acquisitions and investments, potential deterioration in our asset quality, a decline in the value of our investments and an increase in the minimum Capital Adequacy Ratio requirement by the CBRC, as well as changes in the computational method for Capital Adequacy Ratio applied by the CBRC. We may be required to raise additional core or supplementary capital in the future in order to meet the minimum CBRC capital adequacy requirements. To raise additional capital in order to meet the minimum CBRC capital adequacy requirements, we may need to issue additional equity securities that qualify as core capital or other qualifying instruments. However, our ability to obtain additional capital may be restricted by a number of factors, including our future business, financial condition, results of operations and cash flows; necessary government regulatory approvals; our credit rating; general market conditions for capital-raising activities by commercial banks and other financial institutions; and economic, political and other conditions both within and outside the PRC. We cannot assure you that we will be able to obtain additional capital on commercially acceptable 27

30 terms in a timely manner or at all. As such, there can be no assurance that we will continue to be able to comply with our capital adequacy requirements. Furthermore, the CBRC may increase the minimum capital adequacy requirements or change the methodology for calculating regulatory capital or Capital Adequacy Ratio, or we may otherwise be subject to new capital adequacy requirements. If our Capital Adequacy Ratio does not meet the regulatory requirements, the regulatory authorities may adopt certain corrective measures including, but not limited to, restricting the growth of our risk-bearing assets, suspending all of our operation activities other than low-risk business, as well as restricting our dividend payment, which may materially and adversely affect our business, financial condition and results of operations. The growth rate of the banking industry in the PRC may not be sustainable. We expect the banking industry in the PRC to expand as a result of anticipated growth in the PRC s economy, increases in household income, further social welfare reforms, demographic changes and the opening of the PRC s banking industry to foreign participants. However, it is not clear how certain trends and events, such as the pace of the PRC s economic growth, the PRC s implementation of its commitments to World Trade Organisation accession, the development of the domestic capital and insurance markets and the ongoing reform of the social welfare system, will affect the PRC s banking industry. In addition, the banking industry in the PRC may be affected by systemic risks. Consequently, there can be no assurance that the growth and development of the PRC s banking industry will be sustainable. The effectiveness of our credit risk management is affected by the quality and scope of information available in the PRC. National credit information databases developed by the PBOC have been operational only since Due to the short operational history, such databases are not able to provide complete credit information on many of our credit applicants. Therefore, our assessment of the credit risk associated with a particular customer may not be based on complete, accurate or reliable information. As a result, our ability to manage effectively our credit risk may be adversely affected, which may materially and adversely affect our business, financial condition and results of operations. Certain facts and statistics and information relating to us are derived from publications not independently verified by the Bank, the Arrangers or the Dealers or any of their respective directors, employees, representatives, affiliates or advisers. Certain facts and statistics in this Base Prospectus relating to the PRC, its economy and its banking industry are derived from various official and publicly available sources generally believed to be reliable. While reasonable care has been taken to ensure that the facts and statistics or information relating to us presented in this Base Prospectus have been accurately extracted from such sources, such facts, statistics and information have not been independently verified by the Bank, the Arrangers or the Dealers or any of their respective directors, employees, representatives, affiliates or advisers; therefore, none of them makes any representation as to the accuracy of such facts and statistics or information, which may not be consistent with other information compiled within or outside the PRC and may not be complete or up-to-date. Due to possibly flawed or ineffective collection methods or discrepancies between published information and market practice or other reasons, the statistics herein may be inaccurate or may not be comparable from period to period or to statistics produced for other economies and should not be unduly relied upon. 28

31 RISKS RELATING TO THE PRC The slowdown of the PRC s economy caused in part by the recent challenging global economic conditions may adversely affect us. A substantial part of our revenue is derived from the PRC. We rely, to a significant degree, on our domestic operations to achieve revenue growth. Domestic demand for banking services is materially affected by growth of private consumption and overall economic growth in the PRC. The global crisis in financial services and credit markets in 2008 caused a slowdown in the economic growth in many countries, including the PRC. Although the PRC s economic growth has increased compared to its level immediately after the global financial crisis, it has displayed signs of slowdown as evidenced by a decrease in the growth rate of the PRC s gross domestic product in recent years. This was caused by a combination of factors most of which are beyond our control, such as the global economic conditions, governmental policies and changes in market dynamics globally and regionally. In 2015, the PRC government reported a gross domestic product of RMB67.67trillion, representing year-on-year growth of 6.9 per cent., which was a record-low figure for the past 25 years. In the first quarter of 2016, the PRC government reported a gross domestic product of RMB15,852.6 billion, representing year-on-year growth of 6.7 per cent., according to statistics released by National Bureau of Statistics of China. Although the PRC government has recently taken several measures and actions with an aim to increase investors confidence in the PRC economy, there can be no assurance that those measures will be effective. There are uncertainties relating to the overall prospects for the global and the PRC economies this year and beyond, which may have a material adverse impact on our business, prospects, financial conditions and results of operations. Turmoil in the financial markets could increase our cost of borrowing and impede access to or increase the cost of financing our operations and investments. The availability of credit to entities operating within emerging markets, including us, is significantly influenced by levels of investor confidence in such markets as a whole. Any factors that may affect market confidence could affect the costs or availability of funding for entities within emerging markets. Historically, challenging market conditions in emerging markets have resulted in reduced liquidity, widening of credit spreads, lack of price transparency in credit markets, a reduction in available financing and a tightening of credit terms. In 2015, the PRC stock markets have experienced significant turmoil and disruption. Throughout June and early July of 2015 and more recently, the Shanghai Composite Index experienced significant declines and many PRC-listed companies were subject to trading suspensions on major stock exchanges. The PRC government responded by cutting interest rates, suspending initial public offering and starting investigations into market manipulation in an effort to stabilise the market. Due to its increasing financial reliance upon PRC, Hong Kong s stock markets experienced a similar fluctuation during the relevant times and the Hang Seng Index had a record-breaking slump in a single day in the recent decade. As our shares are listed on both the Hong Kong Stock Exchange and the Shanghai Stock Exchange, significant fluctuations in these financial markets could cause substantial adverse effects on our business operations and investments as a whole. The PRC s economic, political and social conditions, as well as government policies, could affect our businesses. A substantial majority of our businesses, assets and operations is located in the PRC. Accordingly, our business prospects, financial condition and results of operations are, to a significant degree, subject to the economic, political and legal developments in the PRC. The PRC s economy differs from the economies of most developed countries in many respects, including, among others, government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The PRC economy has been undergoing a transition from a planned economy to a market-oriented economy. A substantial portion of productive assets in the PRC is still owned by the PRC government. The government also exercises significant control over the PRC s economic growth by allocating resources, setting monetary policy and providing preferential treatment to particular industries or companies. In recent years, the PRC government has 29

32 pushed forward a large number of economic reform measures to introduce market forces and promote the establishment of sound corporate governance structures. Such economic reform measures may be adjusted, modified or applied differently depending on the industries and regions of the country. As a result, we may not benefit from certain of such measures. The PRC government has the power to implement macroeconomic controls affecting the PRC s economy. The government has implemented various measures in an effort to control the growth rate of certain industries and restrain inflation. As measured by gross domestic product (GDP), the PRC has been one of the world s fastest growing economies in recent years. The PRC s real GDP growth was 7.4% and 6.9% in 2014 and 2015, respectively. However, the PRC may not be able to sustain such a growth rate. During the recent global financial crisis and economic slowdown, the growth of the PRC s GDP slowed. If the PRC s economy experiences a decrease in growth rate or a significant downturn, the unfavourable business environment and economic condition for our customers could negatively impact their ability or willingness to repay our loans and reduce their demand for our banking services. Our business, financial condition and results of operations may be materially and adversely affected. The PRC legal system could limit the legal protections available to you. We are organised under the laws of the PRC. The PRC legal system is based on written statutes. The PRC government has promulgated laws and regulations dealing with such economic matters as the issuance and trading of securities, shareholder rights, foreign investment, corporate organisation and governance, commerce, taxation and trade. However, many of these laws and regulations continue to evolve, may be subject to different interpretations and may be inconsistently enforced. In addition, there is only a limited volume of published court decisions that may be cited for reference, and such cases have limited precedent value, as they are not binding on subsequent cases. These uncertainties relating to the interpretation of PRC laws and regulations can affect the legal remedies and protections that are available to you and can adversely affect the value of your investment. You may experience difficulties in effecting service of legal process and enforcing judgments against us and our management. The Bank is a company incorporated under the laws of the PRC, and a substantial majority of the Group s businesses, assets and operations are located in the PRC. In addition, a substantial majority of the Bank s directors, supervisors and executive officers reside in the PRC, and substantially all of their assets are located in the PRC. As a result, it may not be possible to serve legal written process within the United States or elsewhere outside the PRC upon the Bank or such directors, supervisors or executive officers, including with respect to matters arising under U.S. federal securities laws or applicable State securities laws. Moreover, the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgements of courts with the United States, the United Kingdom, Japan and many other countries. According to the Civil Procedure Law of the PRC (as amended in 2012), the PRC courts can recognise and enforce foreign judgments in accordance with the principal of reciprocity in the absence of international treaties. In addition, pursuant to the Arrangement of the Supreme People s Court between the Mainland and the HKSAR on Reciprocal Recognition and Enforcement of the Decisions of Civil and Commercial Cases under Consensual Jurisdiction ( 關於內地與香港特別行政區法院相互認可和執行當事人協議管轄的民商事案件判決的安排 ), if the parties have expressly agreed in writing that the Hong Kong Court has sole jurisdiction over civil and commercial cases, the Chinese courts can recognise and enforce final judgments made by specific courts in Hong Kong (including the Court of Final Appeal, Court of Appeal, Court of First Instance and District Court) in relation to payments. Other than that, judgments made by courts in the United States and other courts in Hong Kong may not be recognised or enforced in the PRC. As a result, recognition and enforcement in the PRC or Hong Kong of judgments of a court in the United States and any of the other jurisdictions mentioned above in relation to any matter may be difficult or impossible. 30

33 Any future occurrence of natural disasters or outbreaks of contagious diseases in the PRC may have a material adverse effect on our business, financial condition and results of operations. Any future occurrence of natural disasters or outbreaks of health epidemics and contagious diseases, including avian influenza, Severe Acute Respiratory Syndrome (SARS), Ebola virus disease (Ebola), Middle East Respiratory Syndrome corona virus (MERS), H5N1 influenza, H1N1 influenza or H7N9 influenza, may adversely affect our business, financial condition and results of operations. An outbreak of a health epidemic or contagious disease could result in a widespread health crisis and restrict the level of business activity in affected areas, which may in turn adversely affect our business, financial condition and results of operations. Moreover, the PRC has experienced natural disasters such as earthquakes, floods and drought in the past few years. Any future occurrence of severe natural disasters in the PRC may adversely affect its economy and in turn our business, financial condition and results of operations. There is no guarantee that any future occurrence of natural disasters or outbreak of avian influenza, Ebola, SARS, MERS, H5N1 influenza, H1N1 influenza, H7N9 influenza or other epidemics, or the measures taken by the PRC government or other countries in response to a future outbreak of these epidemics, will not seriously interrupt our operations or those of our customers, which may have a material adverse effect on our business, financial condition and results of operations. RISKS RELATING TO THE NOTES Difficulties may be experienced in effecting service of legal process and enforcing judgments against the Bank and its management. The Bank is a company incorporated under the laws of the PRC, and substantially all of the Bank s business, assets and operations are located in China. In addition, a majority of the Bank s directors, supervisors and executive officers reside in China, and substantially all of the assets of such directors, supervisors and executive officers are located in China. Therefore, it may not be possible for investors to effect service of process upon the Bank or those persons inside China. China has not entered into treaties or arrangements providing for the reciprocal recognition and enforcement of judgements of courts with the United States, the United Kingdom, Japan and many other countries. Hence, the recognition and enforcement in China of judgments of a court in a foreign jurisdiction in relation to any matter not subject to a binding arbitration provision may be difficult or even impossible. The Notes may not be a suitable investment for all investors. Each potential investor in any Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: have sufficient knowledge and experience to make a meaningful evaluation of the relevant Notes, the merits and risks of investing in the relevant Notes and the information contained or incorporated by reference in this Base Prospectus, any applicable supplement to this Base Prospectus or any Final Terms; have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the relevant Notes and the impact such investment will have on its overall investment portfolio; have sufficient financial resources and liquidity to bear all of the risks of an investment in the relevant Notes, including where principal or interest is payable in one or more currencies, or where the currency for principal or interest payments is different from the potential investor s currency; understand thoroughly the terms of the relevant Notes and be familiar with the behaviour of any relevant indices and financial markets; and 31

34 be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. Some Notes may be complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to the purchaser s overall portfolios. A potential investor should not invest in Notes which are complex financial instruments unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of such Notes and the impact this investment will have on the potential investor s overall investment portfolio. Investors shall pay attention to any modification, waivers and substitution. The Conditions of the Notes contain provisions for calling meetings of Noteholders to consider matters affecting their interests generally. These provisions permit defined majorities to bind all Noteholders, including Noteholders who did not attend and vote at the relevant meeting and Noteholders who voted in a manner contrary to the majority. Risks related to the structure of a particular issue of Notes. A wide range of Notes may be issued under the Programme. A number of these Notes may have features which contain particular risks for potential investors. Set out below is a description of certain such features: Notes subject to optional redemption An optional redemption feature of Notes is likely to limit their market value. During any period when the Issuer may elect to redeem Notes, the market value of those Notes generally will not rise substantially above the price at which they can be redeemed. This also may be true prior to any redemption period. The Issuer may be expected to redeem Notes when its cost of borrowing is lower than the interest rate on the Notes. At those times, an investor generally would not be able to reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Notes being redeemed and may only be able to do so at a significantly lower rate. Potential investors should consider reinvestment risk in light of other investments available at that time. Inverse Floating Rate Notes Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upon a reference rate such as the London Interbank Offered Rate. The market values of such Notes typically are more volatile than market values of other conventional floating rate debt securities based on the same reference rate (and with otherwise comparable terms). Inverse Floating Rate Notes are more volatile because an increase in the reference rate not only decreases the interest rate of the Notes, but may also reflect an increase in prevailing interest rates, which further adversely affects the market value of these Notes. Fixed/Floating Rate Notes Fixed/Floating Rate Notes may bear interest at a rate that converts from a fixed rate to a floating rate, or from a floating rate to a fixed rate. Where the Issuer has the right to effect such a conversion, this will affect the secondary market in, and the market value of, the Notes since the Issuer may be expected to convert the rate when it is likely to result in a lower overall cost of borrowing for the Issuer. If the Issuer converts from a fixed rate to a floating rate in such circumstances, the spread on the Fixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparable Floating Rate Notes tied to the same reference rate. In addition, the new floating rate at any time may be lower than the rates on other Notes. If the Issuer converts from a floating rate to a fixed rate in such circumstances, the fixed rate may be lower than the then prevailing rates on its Notes. 32

35 Notes issued at a substantial discount or premium The market values of securities issued at a substantial discount or premium to their nominal amount tend to fluctuate more in relation to general changes in interest rates than prices for conventional interest-bearing securities do. Generally, the longer the remaining term of the securities, the greater the price volatility as compared to conventional interest-bearing securities with comparable maturities. Risks related to the Notes generally Set out below is a brief description of certain risks relating to the Notes generally: Change of law The Conditions of the Notes are based on English law in effect as at the date of this Base Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to English law or administrative practice after the date of this Base Prospectus. Notes where denominations involve integral multiples: definitive Notes In relation to any issue of Notes which have denominations consisting of a minimum Specified Denomination plus one or more higher integral multiples of another smaller amount, it is possible that such Notes may be traded in amounts in excess of the minimum Specified Denomination that are not integral multiples of such minimum Specified Denomination. In such a case a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system would not be able to sell the remainder of such holding without first purchasing a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination. Further, a holder who, as a result of trading such amounts, holds an amount which is less than the minimum Specified Denomination in his account with the relevant clearing system at the relevant time may not receive a definitive Note in bearer form in respect of such holding (should definitive Notes be printed or issued) and would need to purchase a principal amount of Notes at or in excess of the minimum Specified Denomination such that its holding amounts to a Specified Denomination in order to receive a definitive Note in respect thereof. If such definitive Notes are issued, holders should be aware that definitive Notes which have a denomination that is not an integral multiple of the minimum Specified Denomination may be illiquid and difficult to trade. Reliance on the procedures of the relevant ICSD Notes issued under the Programme will be represented on issue by one or more Global Notes that may be deposited with a common depositary for Euroclear and Clearstream, Luxembourg (each as defined under Form of the Notes ) (together, the ICSDs). Except in the circumstances described in each Global Note, investors will not be entitled to receive Notes in definitive form. The relevant ICSD and their respective direct and indirect participants will maintain records of the beneficial interests in each Global Note held through it. While the Notes are represented by a Global Note, investors will be able to trade their beneficial interests only through the relevant ICSD and their respective participants. While the Notes are represented by Global Notes, the Issuer will discharge its payment obligation under the Notes by making payments through the relevant ICSD. A holder of a beneficial interest in a Global Note must rely on the procedures of the relevant ICSD and its participants to receive payments under the Notes. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, beneficial interests in any Global Note. Holders of beneficial interests in a Global Note will not have a direct right to vote in respect of the Notes so represented. Instead, such holders will be permitted to act only to the extent that they are enabled by the relevant ICSD and its participants to appoint appropriate proxies. 33

36 Conflicts of interest Calculation Agent Potential conflicts of interest may exist between the Calculation Agent (if any) and Noteholders (including where a Dealer acts as a calculation agent), including with respect to certain determinations and judgements that such Calculation Agent may make pursuant to the Conditions that may influence amounts receivable by the Noteholders during the term of the Notes and upon their redemption. Risks related to the market generally Set out below is a brief description of the principal market risks, including liquidity risk, exchange rate risk, interest rate risk and credit risk: The secondary market generally Notes may have no established trading market when issued, and one may never develop. If a market for the Notes does develop, it may not be very liquid. Therefore, investors may not be able to sell their Notes easily or at prices that will provide them with a yield comparable to similar investments that have a developed secondary market. This is particularly the case for Notes that are especially sensitive to interest rate, currency or market risks, are designed for specific investment objectives or strategies or have been structured to meet the investment requirements of limited categories of investors. These types of Notes generally would have a more limited secondary market and more price volatility than conventional debt securities. Illiquidity may have a severe adverse effect on the market value of Notes. Exchange rate risks and exchange controls may result in investors receiving less interest or principal than expected The Issuer will pay principal and interest on the Notes in the currency specified in the relevant Final Terms (the Specified Currency). This presents certain risks relating to currency conversions if an investor s financial activities are denominated principally in a currency or currency unit (the Investor s Currency) other than the Specified Currency. These include the risk that exchange rates may significantly change (including changes due to devaluation of the Specified Currency or revaluation of the Investor s Currency) and the risk that authorities with jurisdiction over the Investor s Currency may impose or modify exchange controls. An appreciation in the value of the Investor s Currency relative to the Specified Currency would decrease (1) the Investor s Currency equivalent yield on the Notes, (2) the Investor s Currency equivalent value of the principal payable on the Notes and (3) the Investor s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal. Changes in market interest rates may adversely affect the value of Fixed Rate Notes. Investment in Fixed Rate Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of Fixed Rate Notes. Ratings of Notes Credit ratings assigned to the Issuer or any Notes may not reflect all the risks associated with an investment in those Notes. One or more independent credit rating agencies may assign credit ratings to the Issuer or the Notes. The ratings may not reflect the potential impact of all risks related to structure, market, additional factors discussed above, and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be revised, suspended or withdrawn by the rating agency at any time. 34

37 In general, European regulated investors are restricted under the CRA Regulation from using credit ratings for regulatory purposes, unless such ratings are issued by a credit rating agency established in the EU and registered under the CRA Regulation (and such registration has not been withdrawn or suspended), subject to transitional provisions that apply in certain circumstances whilst the registration application is pending. Such general restriction will also apply in the case of credit ratings issued by non-eu credit rating agencies, unless the relevant credit ratings are endorsed by an EU registered credit rating agency or the relevant non-eu rating agency is certified in accordance with the CRA Regulation (and such endorsement action or certification, as the case may be, has not been withdrawn or suspended). The list of registered and certified rating agencies published by the European Securities and Markets Authority (ESMA) on its website in accordance with the CRA Regulation is not conclusive evidence of the status of the relevant rating agency included in such list, as there may be delays between certain supervisory measures being taken against a relevant rating agency and the publication of the updated ESMA list. Certain information with respect to the credit rating agencies and ratings is set out on the cover of this Base Prospectus. Legal investment considerations may restrict certain investments The investment activities of certain investors are subject to investment laws and regulations, or review or regulation by certain authorities. Each potential investor should consult its legal advisers to determine whether and to what extent: (1) Notes are legal investments for it, (2) Notes can be used as collateral for various types of borrowing, and (3) other restrictions apply to its purchase or pledge of any Notes. Financial institutions should consult their legal advisers or the appropriate regulators to determine the appropriate treatment of Notes under any applicable riskbased capital or similar rules. RISKS RELATING TO NOTES DENOMINATED IN RENMINBI Notes denominated in RMB (RMB Notes) may be issued under the Programme. Prospective investors should carefully take into account the following considerations, in addition to the other information contained in this Base Prospectus, before investing in the RMB Notes. RMB Notes contain particular risks for potential investors. Renminbi is not freely convertible and there are significant restrictions on the remittance of Renminbi into and out of the PRC which may adversely affect the liquidity of RMB Notes Renminbi is not freely convertible at present. The PRC Government continues to regulate conversion between Renminbi and foreign currencies, including the Hong Kong dollar, despite significant reduction in control by it in recent years over trade transactions involving import and export of goods and services as well as other frequent routine foreign exchange transactions. These transactions are known as current account items. Currently, participating banks in Hong Kong, Macao, Singapore, Taiwan, Seoul, Frankfurt, London, Paris, Luxembourg, Sydney, Doha, Toronto, Kuala Lumpur, Bangkok, Santiago, Budapest, Johannesburg, Buenos Aires and Lusaka have been permitted to engage in the settlement of current account trade transactions in Renminbi. However, remittance of Renminbi by foreign investors into the PRC for purposes such as capital contributions, known as capital account items, is generally only permitted upon obtaining specific approvals from the relevant authorities on a case-by-case basis and subject to a strict monitoring system. Regulations in the PRC on the remittance of Renminbi into the PRC for settlement of capital account items are developing gradually. On 7 April 2011, SAFE promulgated the Circular on Issues Concerning the Capital Account Items in connection with Cross-Border Renminbi (the SAFE Circular), which became effective on 1 May According to the SAFE Circular, in the event that foreign investors intend to use Renminbi (including offshore Renminbi and onshore Renminbi held in the capital accounts of non-prc residents) to make a contribution to an onshore enterprise or make payment for the transfer of an equity interest of an onshore enterprise by a PRC resident, such onshore enterprise shall be required to submit the prior written consent of the relevant Ministry of Commerce (MOFCOM) to the relevant local branch of SAFE of such onshore enterprise and register for a foreign invested enterprise status. Further, the SAFE Circular clarifies that foreign debts borrowed, and foreign guarantees provided, by an onshore entity (including a financial institution) in Renminbi shall, in principle, be regulated under the current PRC foreign debt and foreign guarantee regime. 35

38 On 13 October 2011, the PBOC promulgated the Administrative Measures on Renminbi Settlement of Foreign Direct Investment ( 外商直接投資人民幣結算業務管理辦法 ) (the PBOC FDI Measures) as part of the implementation of the PBOC s detailed Renminbi foreign direct investments (FDI) accounts administration system. The system covers almost all aspects in relation to FDI, including capital injections, payments for the acquisition of PRC domestic enterprises, repatriation of dividends and other distributions, as well as Renminbi denominated crossborder loans. Under the PBOC FDI Measures, special approval for FDI and shareholder loans from the PBOC, which was previously required, is no longer necessary. In some cases however, post-event filing with the PBOC is still necessary. On 14 June 2012, the PBOC further issued the implementing rules for the PBOC FDI Measures, which provides more detailed rules relating to cross-border Renminbi direct investments and settlement. On 5 July 2013, the PBOC promulgated the Circular on Policies related to Simplifying and Improving Cross-border Renminbi Business Procedures( 關於簡化跨境人民幣業務流程和完善有關政策的通知 ) (the 2013 PBOC Circular), which sought to improve the efficiency of the cross-border Renminbi settlement process. For example, where automatic fund remittance occurs, the bank can debit the amount into the relevant account first and subsequently verify the relevant transaction. The PBOC further issued the Circular on the Relevant Issues on Renminbi Settlement of Investment in Onshore Financial Institutions by Foreign Investors( 關於境外投資者投資境內金融機構人民幣結算有關事項的通知 )on 23 September 2013, which provides further details for using Renminbi to invest in a financial institution domiciled in the PRC. On 3 December 2013, MOFCOM promulgated the Circular on Issues in relation to Cross-border Renminbi Foreign Direct Investment ( 商務部關於跨境人民幣直接投資有關問題的公告 ) (the MOFCOM Circular), which became effective on 1 January 2014, to further facilitate FDI by simplifying and streamlining the applicable regulatory framework. Pursuant to the MOFCOM Circular, written approval from the appropriate office of MOFCOM and/or its local counterparts specifying Renminbi Foreign Direct Investment and the amount of capital contribution is required for each FDI. In contrast with previous MOFCOM regulations on FDI, the MOFCOM Circular no longer contains the requirements for central-level MOFCOM approvals for investments of CNY300 million or more, or in relation to certain industries such as financial guarantee, financial leasing, micro-credit, auction, foreign invested investment companies, venture capital and equity investment vehicles, cement, iron and steel, electrolyse aluminium, ship building and other industries subject to the state s macro-economic control. Unlike previous MOFCOM regulations on FDI, the MOFCOM Circular has also removed the approval requirement for foreign investors who intend to change the currency of their existing capital contribution from a foreign currency to Renminbi. In addition, the MOFCOM Circular also clearly prohibits the FDI funds from being used for any direct or indirect investment in securities and financial derivatives (except for investments in PRC listed companies by strategic investors) or for entrustment loans in the PRC. The reforms which are being introduced and will be introduced in the Shanghai Free Trade Zone (the Shanghai FTZ) aim to upgrade cross-border trade, liberalise foreign exchange control, improve convenient cross-border use of Renminbi and promote the internationalisation of Renminbi. However, given the infancy stage of the Shanghai FTZ, how the reforms will be implemented and whether (and if so when) the reforms will be rolled out throughout China remain uncertain. To support the development of the Shanghai FTZ, the Shanghai Head Office of the PBOC issued the Circular on Supporting the Expanded Cross-border Utilisation of Renminbi in the Shanghai FTZ ( 關於支持中國 ( 上海 ) 自由貿易試驗區擴大人民幣跨境使用的通知 ) (the PBOC Shanghai FTZ Circular) on 20 February 2014, which allows banks in Shanghai to settle FDI based on a foreign investor s instruction. In respect of FDI in industries that are not on the negative list of the Shanghai FTZ, the MOFCOM approval previously required is replaced by a filing. However, the application of the PBOC Shanghai FTZ Circular is limited to the Shanghai FTZ. 36

39 The above measures and circulars are relatively new and will be subject to interpretation and application by the relevant PRC authorities. The local counterparts of the relevant PRC authorities may adopt different practices in applying these measures and circulars and impose conditions for the settlement of Renminbi current account items. Although starting from 1 October 2016, the Renminbi will be added to the Special Drawing Rights basket created by the International Monetary Fund, there is no assurance that the PRC Government will continue to liberalise control over cross-border remittance of Renminbi in the future, that any pilot schemes for Renminbi cross-border utilisation will not be discontinued or that new regulations in the PRC will not be promulgated in the future which have the effect of restricting or eliminating the remittance of Renminbi into or outside the PRC. In the event that funds cannot be repatriated outside the PRC in Renminbi, this may affect the overall availability of Renminbi outside the PRC and the ability of the Issuer to source Renminbi to finance its obligations under Notes denominated in Renminbi. There is only limited availability of Renminbi outside the PRC, which may affect the liquidity of RMB Notes and the Issuer s ability to source Renminbi outside the PRC to service RMB Notes As a result of the restrictions by the PRC Government on cross-border Renminbi fund flows, the availability of Renminbi outside the PRC is limited. Currently, licensed banks in Singapore and Hong Kong may offer limited Renminbi denominated banking services to Singapore residents, Hong Kong residents and specified business customers. While the PBOC has established Renminbi clearing and settlement mechanisms for participating banks in various countries including Hong Kong, Macao, Singapore, Taiwan, Seoul, Frankfurt, London, Paris, Luxembourg, Sydney, Doha, Toronto, Kuala Lumpur, Bangkok, Santiago, Budapest, Johannesburg, Buenos Aires and Lusaka through settlement agreements on the clearing of Renminbi business (the Settlement Agreements) with Bank of China (Hong Kong) Limited, Bank of China, Macao Branch, Industrial and Commercial Bank of China Limited, Singapore Branch, Bank of China, Taipei Branch, Bank of Communications, Seoul Branch, Bank of China, Frankfurt Branch, China Construction Bank (London) Limited, Bank of China, Paris Branch, Industrial and Commercial Bank of China Limited, Luxembourg Branch, Bank of China (Australia) Limited, Industrial and Commercial Bank of China Limited, Doha Branch, Industrial and Commercial Bank of China (Canada) Limited, Bank of China (Malaysia) Limited Industrial and Commercial Bank of China (Thailand) Limited, China Construction Bank, Chile Branch, Bank of China (Hungary) Close Ltd., Bank of China Limited, Johannesburg Branch, Industrial and Commercial Bank (Argentina) S.A. and Bank of China (Zambia) Limited (each, an RMB Clearing Bank), the current size of Renminbi-denominated financial assets outside the PRC is limited. Renminbi business participating banks do not have direct Renminbi liquidity support from the PBOC. They are only allowed to square their open positions with the relevant RMB Clearing Bank after consolidating the Renminbi trade position of banks outside Hong Kong, Macao, Singapore, Taiwan, Seoul, Frankfurt, London, Paris, Luxembourg, Sydney, Doha, Toronto, Kuala Lumpur, Bangkok, Santiago, Budapest, Johannesburg, Buenos Aires and Lusaka that are in the same bank group of the participating banks concerned with their own trade position, and the relevant RMB Clearing Bank only has access to onshore liquidity support from the PBOC for the purpose of squaring open positions of participating banks for limited types of transactions, including open positions resulting from conversion services for corporations relating to cross border trade settlement. The relevant RMB Clearing Bank is not obliged to square for participating banks any open positions as a result of other foreign exchange transactions or conversion services and the participating banks will need to source Renminbi from outside the PRC to square such open positions. Although it is expected that the offshore Renminbi market will continue to grow in depth and size, its growth is subject to many constraints as a result of PRC laws and regulations on foreign exchange. There is no assurance that new PRC regulations will not be promulgated or the Settlement Agreements will not be terminated or amended in the future which will have the effect of restricting availability of Renminbi outside the PRC. The limited availability of Renminbi outside the PRC may affect the liquidity of the RMB Notes. To the extent the Issuer is required to 37

40 source Renminbi outside the PRC to service the RMB Notes, there is no assurance that the Issuer will be able to source such Renminbi on satisfactory terms, if at all. Investment in RMB Notes is subject to exchange rate risks The Issuer will make all payments of interest and principal with respect to the RMB Notes in Renminbi unless otherwise specified. The value of Renminbi against other foreign currencies fluctuates from time to time and is affected by changes in the PRC and international political and economic conditions as well as many other factors. In August 2015, the PBOC implemented changes to the way it calculates the midpoint against the U.S. Dollar to take into account market-maker quotes before announcing the daily midpoint. This change, among others that may be implemented, may increase the volatility in the value of the Renminbi against other currencies. In January and February 2016, Renminbi experienced further fluctuation in value against the US dollar. With an increased floating range of the Renminbi s value against foreign currencies and a more market-oriented mechanism for determining the mid-point exchange rates, the Renminbi may further appreciate or depreciate significantly in value against the US dollar or other foreign currencies in the long-term. As a result, the value of these Renminbi payments may vary with the changes in the prevailing exchange rates in the marketplace. If the value of Renminbi depreciates against another foreign currency, the value of the investment made by a holder of the RMB Notes in that foreign currency will decline. Investment in RMB Notes is subject to interest rate risks The PRC Government has gradually liberalised the regulation of interest rates in recent years. Further liberalisation may increase interest rate volatility. The RMB Notes may carry a fixed interest rate. Consequently, the trading price of such RMB Notes will vary with fluctuations in interest rates. If a holder of RMB Notes tries to sell any RMB Notes before their maturity, they may receive an offer that is less than the amount invested. Payments with respect to the RMB Notes may be made only in the manner designated in the RMB Notes Investors may be required to provide certification and other information (including Renminbi account information) in order to receive payments in Renminbi in accordance with the Renminbi clearing and settlement system for participating banks in the relevant Offshore Renminbi Centre. All Renminbi payments to investors in respect of the RMB Notes will be made solely (i) when RMB Notes are represented by global certificates deposited with a subcustodian for CMU, by transfer to a Renminbi bank account maintained in Hong Kong in accordance with prevailing CMU rules and procedures, (ii) for so long as the RMB Notes are represented by global certificates held with the common depositary for Euroclear and Clearstream, Luxembourg or any alternative clearing system, by transfer to a Renminbi bank account maintained in Hong Kong or a financial centre in which an RMB Clearing Bank clears and settles Renminbi, if so specified in the Final Terms, in accordance with prevailing Euroclear and/or Clearstream, Luxembourg rules and procedures, or (iii) for so long as the RMB Notes are in definitive form, by transfer to a Renminbi bank account maintained in Hong Kong or a financial centre in which an RMB Clearing Bank clears and settles Renminbi, if so specified in the Final Terms in accordance with prevailing rules and regulations. Other than described in the Terms and Conditions of the Notes, the Issuer cannot be required to make payment by any other means (including in any other currency or in bank notes, by cheque or draft or by transfer to a bank account in the PRC). Gains on the transfer of the RMB Notes may become subject to income taxes under PRC tax laws Under the PRC Enterprise Income Tax Law 2008, the PRC Individual Income Tax Law 1980, and the relevant implementing rules, each as amended from time to time (the EIT Law and the IIT Law, respectively), any gain realised on the transfer of RMB Notes by non-prc resident enterprise or individual Noteholders may be subject to PRC enterprise income tax (EIT) or PRC individual income tax (IIT) if such gain is regarded as income derived from sources within the PRC. While the EIT Law levies EIT at the rate of 20 per cent. of the gains derived by such non-prc resident enterprise Noteholders from the transfer of the Notes, its implementation rules have reduced the EIT rate to 10 per cent. In accordance with the IIT Law and its implementation rules (as amended from time to 38

41 time), any gain realised by a non-prc resident individual Noteholder from the transfer of the Notes may be regarded as being sourced from the PRC and thus be subject to IIT at a rate of 20 per cent. of the gains derived by such non-prc resident individual Noteholder from the transfer of the Notes. However, there remains uncertainty as to whether the gains realised from the transfer of the RMB Notes would be treated as income derived from sources within the PRC and be subject to PRC tax. This will depend on how the PRC tax authorities interpret, apply or enforce the EIT Law, the IIT and their respective implementation rules. If such gains are determined as income sourced in the PRC by the relevant PRC tax authorities, (i) the non-prc resident enterprise Noteholders may be subject to EIT at the rate of 10 per cent. of the gains derived by such non- PRC resident enterprise Noteholders and (ii) the non-prc resident individual Noteholders may be subject to IIT at the rate of 20 per cent. of the gains derived by such non-prc resident individual Noteholders. Unless there is an applicable tax treaty between PRC and the jurisdiction in which such non-prc resident enterprise or individual resident holders of RMB Notes reside that reduces or exempts the relevant EIT or IIT, the value of their investment in RMB Notes may be materially and adversely affected. RISKS RELATING TO THIS BASE PROSPECTUS The Issuer cannot assure you of the accuracy or comparability of facts, forecasts and statistics contained in this Base Prospectus with respect to the PRC, its economy or the PRC and global banking industries. Facts, forecasts and statistics in this Base Prospectus relating to the PRC, the PRC s economy and the PRC and global banking industries, including the Bank s market share information, are derived from various governmental sources which are generally believed to be reliable. However, the Issuer cannot guarantee the quality and reliability of such material. In addition, these facts, forecasts and statistics have not been independently verified by the Issuer and may not be consistent with information available from other sources, and may not be complete or up to date. The Issuer has taken reasonable care in reproducing or extracting the information from such sources. However, because of potentially flawed methodologies, discrepancies in market practice and other problems, these facts, forecasts and other statistics may be inaccurate or may not be comparable from period to period or to facts, forecasts or statistics of other economies. Risks relating to forward-looking statements. The Issuer has included certain statements in this Base Prospectus which constitute forward-looking statements (the meaning of which is discussed above under Cautionary statement regarding forward-looking statements ). Actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties associated with the Issuer s expectations with respect to, but not limited to, the Bank s ability to successfully implement its strategy, its ability to integrate recent or future mergers or acquisitions into its operations, future levels of non-performing assets and restructured assets, its growth and expansion, the adequacy of its provision for credit and investment losses, technological changes, investment income, its ability to market new products, cash flow projections, the outcome of any legal or regulatory proceedings it is or becomes a party to, the future impact of new accounting standards, its ability to pay dividends, its ability to roll over its short-term funding sources, its exposure to operational, market, credit, interest rate and currency risks and the market acceptance of and demand for Internet banking services. Accordingly, undue reliance must not be placed on such forward-looking statements. 39

42 INFORMATION INCORPORATED BY REFERENCE The following documents which previously have been published and have been filed with the Central Bank and the DFSA shall be incorporated in, and form part of, this Base Prospectus: (a) (b) (c) unaudited interim condensed consolidated financial statements of the Group as at and for the three months ended 31 March 2016 as set out in the Group s First Quarterly Report of 2016 (available at consolidated financial statements of the Group as at and for the year ended 31 December 2015 together with the audit report thereon and the unaudited supplementary financial information, as set out on pages 128 to 287 of the Group s 2015 Annual Report (available at annualreport htm); and consolidated financial statements of the Group as at and for the year ended 31 December 2014 together with the audit report thereon and the unaudited supplementary financial information, as set out on pages 128 to 279 of the Group s 2014 Annual Report (available at Following the publication of this Base Prospectus a supplement may be prepared by the Issuer and approved by the Central Bank in accordance with Article 16 of the Prospectus Directive and the DFSA. Statements contained in any such supplement (or contained in any document incorporated by reference therein) shall, to the extent applicable (whether expressly, by implication or otherwise), be deemed to modify or supersede statements contained in this Base Prospectus or in a document which is incorporated by reference in this Base Prospectus. Any statement so modified or superseded shall not, except as so modified or superseded, constitute a part of this Base Prospectus. Copies of documents incorporated by reference in this Base Prospectus can be obtained free of charge from the registered office of the Issuer and from the specified office of the Fiscal Agent for the time being in the Dubai International Financial Centre and London, respectively. Any documents themselves incorporated by reference in the documents incorporated by reference in this Base Prospectus shall not form part of this Base Prospectus. Any non-incorporated parts of a document referred to herein are either deemed not relevant for an investor or are otherwise covered elsewhere in this Base Prospectus. The Issuer will, in the event of any significant new factor, material mistake or inaccuracy relating to information included in this Base Prospectus which is capable of affecting the assessment of any Notes, prepare a supplement to this Base Prospectus or publish a new Base Prospectus for use in connection with any subsequent issue of Notes. 40

43 SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION The summary consolidated statement of profit or loss for the years ended 31 December 2013, 2014 and 2015, the summary consolidated statement of financial position data as at 31 December 2013, 2014 and 2015 and the summary of key financial and operating indicators as at and for the years ended 31 December 2014 and 2015 set forth below are extracted or derived from the financial statements incorporated by reference in this Base Prospectus. Prospective investors should read the summary financial information set forth below in conjunction with the financial statements and accompanying notes. Where indicated financial information set forth in this section is extracted or derived from our audited financial statements for the years ended 31 December 2013, 2014 and Unless otherwise specifically stated so, all other financial information in this section is not extracted/derived from our audited financial statements. Summary Consolidated Statement of Profit or Loss The following table sets forth, for the periods indicated, selected items from our consolidated statement of profit or loss. For the year ended 31 December (in RMB millions) Net interest income (1) , , ,867 Net fee and commission income (1) , , ,391 Net trading income (1) ,745 4,227 Net loss on financial assets and liabilities designated at fair value through profit or loss (1)... (2,413) (10,024) (5,953) Net gain on financial investments (1) ,803 4,920 Other operating income, net (1)... 14,874 15,315 14,281 Operating income (1) , , ,733 Operating expenses (1)... (204,140) (218,674) (220,835) Impairment losses on:... Loans and advances to customers (1)... (38,098) (56,267) (86,022) Others (1)... (223) (462) (971) Operating profit (1) , , ,905 Share of profits of associates and joint ventures (1)... 2,097 2,157 2,330 Profit before taxation (1) , , ,235 Income tax expense (1)... (75,572) (85,326) (85,515) Profit for the year (1) , , ,720 Attributable to equity holders of the parent company (1) , , ,131 Notes: (1) Derived from the audited consolidated financial statements as at and for the years ended 31 December 2013, 2014 and Summary Consolidated Statement of Financial Position Data The following table sets forth, as at the dates indicated, selected items from our consolidated statement of financial position. Assets As at 31 December (in RMB millions) 41

44 As at 31 December Cash and balances with central banks (1)... 3,294,007 3,523,622 3,059,633 Due from banks and other financial institutions (1) , , ,793 Financial assets held for trading (1) ,143 34, ,838 Financial assets designated at fair value through profit or loss (1) , , ,434 Derivative financial assets (1)... 25,020 24,048 78,870 Reverse repurchase agreements (1) , , ,333 Loans and advances to customers (1)... 9,681,415 10,768,750 11,652,812 Financial investments (1)... 3,949,688 4,086,409 4,666,691 Investments in associates and joint ventures (1)... 28,515 28,919 24,185 Property and equipment (1) , , ,426 Deferred income tax assets (1)... 28,860 24,758 21,066 Other assets (1) , , ,699 Total assets (1)... 18,917,752 20,609,953 22,209,780 Liabilities Due to central banks (1) Financial liabilities designated at fair value through profit or loss (1) , , ,927 Derivative financial liabilities (1)... 19,168 24,191 76,826 Due to banks and other financial institutions (1)... 1,269,255 1,539,239 2,265,860 Repurchase agreements (1) , , ,191 Certificates of deposit (1) , , ,352 Due to customers (1)... 14,620,825 15,556,601 16,281,939 Income tax payable (1)... 55,674 60,666 63,266 Deferred income tax liabilities (1) Debt securities issued (1) , , ,622 Other liabilities (1) , , ,073 Total liabilities (1)... 17,639,289 19,072,649 20,409,261 Total equity (1)... 1,278,463 1,537,304 1,800,519 Notes: (1) Derived from the audited consolidated financial statements as at and for the years ended 31 December 2013, 2014 and Summary of Key Financial and Operating Indicators The following tables set forth a summary of our key financial and operating indicators for the periods or as at the dates indicated. 42 For the year ended 31 December Profitability indicators Return on average total assets (1) % 1.30% Return on weighted average equity (2) % 17.10% Net interest spread (3) % 2.30% Net interest margin (4) % 2.47% Return on risk-weighted assets (5) % 2.16% Ratio of net fee and commission income to operating income % 21.44% Cost-to-income ratio (6) % 26.69%

45 As at 31 December Asset quality indicators NPL ratio (7) % 1.50% Allowance to NPLs (8) % % Allowance to total loans ratio (9) % 2.35% Capital adequacy indicators Core Tier 1 Capital Adequacy Ratio (10) % 12.87% Tier 1 Capital Adequacy Ratio (10) % 13.48% Capital Adequacy Ratio (10) % 15.22% Total equity to total assets ratio % 8.11% Risk-weighted assets to total assets ratio % 59.51% Notes: (1) Calculated by dividing net profit by the average balance of total assets at the beginning and at the end of the reporting period. (2) Calculated by dividing net profit attributable to equity holders of the parent company by the weighted average balance of equity attributable to equity holders of the parent company, which is calculated in accordance with the Rules for the Compilation and Submission of Information Disclosure by Companies that Offer Securities to the Public No. 9 Computation and Disclosure of Return on Net Assets and Earnings per Share (Revision 2010) issued by the CSRC. (3) Calculated as the spread between yield on the average balance of interest-generating assets and cost on the average balance of interestbearing liabilities. (4) Calculated by dividing net interest income by the average balance of interest-generating assets. (5) Calculated by dividing net profit by the average balance of risk-weighted assets at the beginning and at the end of the reporting period. (6) Calculated by dividing operating expenses (less business tax and surcharges) by operating income. (7) Calculated by dividing the balance of NPLs by total balance of loans and advances to customers. (8) Calculated by dividing allowance for impairment losses on loans by total balance of NPLs. (9) Calculated by dividing allowance for impairment losses on loans by total balance of loans and advances to customers. (10) Calculated in accordance with the Capital Regulation. 43

46 EXCHANGE RATE INFORMATION The PBOC sets and publishes a base exchange rate on a daily basis with reference primarily to the supply and demand of Renminbi against a basket of U.S. dollar currencies in the market during the prior day. The PBOC also takes into account other factors, such as the general conditions existing in the international foreign exchange markets. From 1994 to 20 July 2005, the conversion of Renminbi into foreign currencies, including Hong Kong dollars and U.S. dollars, was based on rates set by the PBOC, which are set daily based on the previous business day s interbank foreign exchange market rates and current exchange rates on the international financial markets. Although PRC governmental policies were introduced in 1996 to reduce restrictions on the convertibility of Renminbi into foreign currency for current account items, conversion of Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities investment, requires the approval of the State Administration of Foreign Exchange (SAFE) and other relevant authorities. On 21 July 2005, the PRC government introduced a managed floating exchange rate system to allow the value of the Renminbi to fluctuate within a regulated band based on market supply and demand and by reference to a basket of currencies. On the same day, the value of the Renminbi appreciated by approximately 2 per cent. against the U.S. dollar. The PRC government has since made and in the future may make further adjustments to the exchange rate system. The PBOC authorised the China Foreign Exchange Trading Center, effective since 4 January 2006, to announce the central parity exchange rate of Renminbi against certain foreign currencies at 9:15 a.m. each business day. This rate is set as the central parity exchange rate for the trading in the inter-bank foreign exchange spot market and the trading over the counter for the business day. On 19 June 2010, the PBOC announced that the PRC government would further reform the Renminbi exchange rate regime to increase the flexibility of the exchange rate. On 16 April 2012, the PBOC further enlarged the floating band for the trading prices in the inter-bank spot exchange market of Renminbi against the U.S. dollar to 1 per cent. around the central parity rate. Effective from 17 March 2014, such floating band was further enlarged to 2 per cent. The following table sets forth information concerning exchange rates between the Renminbi and U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this Base Prospectus or will use in the preparation of our periodic reports or any other information to be provided to you. Exchange rates of Renminbi into U.S. dollars are based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. Noon Buying Rate Period end Average (1) High Low (RMB per U.S.$1.00) Note: (1) Annual averages are calculated by using the average of the exchange rates on the last business day of each month during the relevant year. 44

47 USE OF PROCEEDS The net proceeds from each issue of Notes (after deducting underwriting fees and commissions and other expenses incurred by the Issuer in connection with such issue) will be applied by the Issuer to finance its operations and for its general corporate purposes. 45

48 FORM OF THE NOTES The Notes of each Series will be in either bearer form, with or without interest coupons (and talons for further coupons if appropriate) attached, or registered form, without interest coupons or talons attached, in each case as specified in the applicable Final Terms. Bearer Notes The following applies to Notes specified in the applicable Final Terms to be in bearer form. Each Tranche of Bearer Notes will be initially issued in the form of a temporary global note (a Temporary Bearer Global Note) or, if so specified in the applicable Final Terms, a permanent global note (a Permanent Bearer Global Note and, together with a Temporary Bearer Global Note, each a Bearer Global Note) which, in either case, will be delivered on or prior to the original issue date of the Tranche to either (i) a common depositary (the Common Depositary) for Euroclear and Clearstream, Luxembourg or (ii) a sub-custodian for the CMU Service. Notes in bearer form will be delivered and deliverable only outside the United States (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction). Whilst any Bearer Note is represented by a Temporary Bearer Global Note, payments of principal, interest (if any) and any other amount payable in respect of the Notes due prior to the Exchange Date (as defined below) will be made against presentation of the Temporary Bearer Global Note only outside the United States (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction) and only to the extent that certification (in a form to be provided) to the effect that the beneficial owners of interests in the Temporary Bearer Global Note are not U.S. persons or persons who have purchased for resale to any U.S. person or any person within the United States (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction), as required by U.S. Treasury regulations, has been received by Euroclear and/or Clearstream, Luxembourg and/or the CMU Lodging and Paying Agent and (in the case of a Temporary Bearer Global Note delivered to a common depositary for Euroclear and Clearstream, Luxembourg) and Euroclear and/or Clearstream, Luxembourg, as applicable, has given a like certification (based on the certifications it has received) to the Fiscal Agent. On and after the date (the Exchange Date) which is 40 days after a Temporary Bearer Global Note is issued, interests in such Temporary Bearer Global Note will be exchangeable (free of charge) upon a request as described therein either for (i) interests in a Permanent Bearer Global Note of the same Series or (ii) for definitive Bearer Notes of the same Series with, where applicable, receipts, interest coupons and talons attached (as indicated in the applicable Final Terms and subject, in the case of definitive Bearer Notes, to such notice period as is specified in the applicable Final Terms), in each case against certification of beneficial ownership as described above unless such certification has already been given in connection with a payment of principal, interest or any other amount payable in respect of the Bearer Notes. The CMU Service may require that any such exchange for a Permanent Bearer Global Note is made in whole and not in part and in such event, no such exchange will be effected until all relevant account holders (as set out in a CMU Instrument Position Report or any other relevant notification supplied to the CMU Lodging and Paying Agent by the CMU Service) have so certified. The holder of a Temporary Bearer Global Note will not be entitled to collect any payment of interest, principal or other amount due on or after the Exchange Date unless, upon due certification, exchange of the Temporary Bearer Global Note for an interest in a Permanent Bearer Global Note or for definitive Bearer Notes is improperly withheld or refused. Payments of principal, interest (if any) or any other amounts on a Permanent Bearer Global Note will be made through Euroclear and/or Clearstream, Luxembourg against presentation or surrender (as the case may be) of the Permanent Bearer Global Note without any requirement for certification. In respect of a Bearer Global Note held through the CMU Service, any payments of principal, interest (if any) or any other amounts shall be made to the person(s) for whose account(s) interests in the relevant Bearer Global Note are 46

49 credited (as set out in a CMU Instrument Position Report or any other relevant notification supplied to the CMU Lodging and Paying Agent by the CMU Service) and, save in the case of final payment, no presentation of the relevant Bearer Global Note shall be required for such purpose. The applicable Final Terms will specify that a Permanent Bearer Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Bearer Notes with, where applicable, receipts, interest coupons and talons attached upon either (a) not less than 60 days written notice (i), in the case of Notes held by a common depositary for Euroclear and Clearstream, Luxembourg, given at any time from Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) to the Fiscal Agent as described therein or (ii), in the case of Notes held through a sub-custodian for the CMU Service, from the relevant account holders therein to the CMU Lodging and Paying Agent as described therein or (b) only upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that: (a) (b) (c) an Event of Default (as defined in Condition 9) has occurred and is continuing; the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have, or in the case of Notes cleared through the CMU Service, the CMU Service has, been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system is available; or the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Permanent Bearer Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 13 if an Exchange Event occurs. If an Exchange Event occurs, (a) in the case of Notes held by a common depositary for Euroclear and/or Clearstream, Luxembourg, Euroclear and/or Clearstream, Luxembourg or the common depositary on behalf of Euroclear and/or Clearstream, Luxembourg (acting on the instructions of any holder of an interest in such Permanent Bearer Global Note) may give notice to the Fiscal Agent requesting exchange or, (b) in the case of Notes held through a sub-custodian for the CMU Service, the relevant account holders therein, may give notice to the Fiscal Agent or, as the case may be, the CMU Lodging and Paying Agent requesting exchange and, in the event of the occurrence of an Exchange Event as described in (c) above, the Issuer may also give notice to the Fiscal Agent requesting exchange. Any such exchange shall occur not later than 45 days after the date of receipt of the first relevant notice by the Fiscal Agent or, as the case may be, the CMU Lodging and Paying Agent. No definitive Bearer Note delivered in exchange for a Permanent Bearer Global Note will be mailed or otherwise delivered to any location in the United States (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction) in connection with such exchange. The following legend will appear on all Permanent Bearer Global Notes and definitive Bearer Notes which have an original maturity of more than 365 days and on all receipts and interest coupons relating to such Notes: ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE. The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Bearer Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition, redemption or payment of principal in respect of such Notes, receipts or interest coupons or talons. Notes which are represented by a Bearer Global Note will only be transferable in accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg or the CMU Service, as the case may be. 47

50 Registered Notes The following applies to Notes specified in the applicable Final Terms to be in registered form. The Registered Notes of each Tranche will initially be represented by a global note in registered form (a Registered Global Note and, together with any Bearer Global Note, each, a Global Note). Registered Global Notes will be deposited with, and registered in the name of a nominee of, a common depositary for Euroclear and Clearstream, Luxembourg and/or a sub-custodian for the CMU Service (if applicable), as specified in the applicable Final Terms. Persons holding beneficial interests in Registered Global Notes will be entitled or required, as the case may be, under the circumstances described below, to receive physical delivery of definitive Notes in fully registered form. Payments of principal, interest and any other amount in respect of the Registered Global Notes will, in the absence of provision to the contrary, be made to the person shown on the Register (as defined in Condition 5.4) as the registered holder of the Registered Global Notes in the manner set out in Condition 5.4. None of the Issuer, the Fiscal Agent, any Paying Agent or the Registrar will have any responsibility or liability for any aspect of the records relating to or payments or deliveries made on account of beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Payments of principal, interest or any other amount in respect of the Registered Notes in definitive form will, in the absence of provision to the contrary, be made to the persons shown on the Register on the relevant Record Date (as defined in Condition 5.4) immediately preceding the due date for payment in the manner provided in that Condition. Interests in a Registered Global Note will be exchangeable (free of charge), in whole but not in part, for definitive Registered Notes without receipts, interest coupons or talons attached only upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that: (a) (b) (c) an Event of Default has occurred and is continuing; if (i) the Registered Global Note is registered in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg and the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have, or (ii) in the case of Notes cleared through the CMU Service the Issuer has been notified that the CMU Service has, been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and, in any such case, no successor clearing system is available; or the Issuer has or will become subject to adverse tax consequences which would not be suffered were the Notes represented by the Registered Global Note in definitive form. The Issuer will promptly give notice to Noteholders in accordance with Condition 13 if an Exchange Event occurs. If an Exchange Event occurs, (a) in the case of Notes registered in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg, Euroclear and/or Clearstream, Luxembourg or any person acting on their behalf (acting on the instructions of any holder of an interest in such Registered Global Note) and/or, (b) in the case of Notes held through a sub-custodian for the CMU Service, the relevant account holders therein, may give notice to the Registrar or the CMU Lodging and Paying Agent, as applicable, requesting exchange and, in the event of the occurrence of an Exchange Event as described in (c) above, the Issuer may also give notice to the Registrar or the CMU Lodging and Paying Agent, as applicable, requesting exchange. Any such exchange shall occur not later than 10 days after the date of receipt of the first relevant notice by the Registrar. Transfer of Interests Interests in a Registered Global Note may, subject to compliance with all applicable restrictions, be transferred to a person who wishes to hold such interest in another Registered Global Note. No beneficial owner of an interest in a 48

51 Registered Global Note will be able to transfer such interest, except in accordance with the applicable procedures of Euroclear and Clearstream, Luxembourg and the CMU Service, in each case to the extent applicable. General Pursuant to the Agency Agreement (as defined under Terms and Conditions of the Notes ), the Fiscal Agent, or, as the case may be, the CMU Lodging and Paying Agent shall arrange that, where a further Tranche of Notes is issued which is intended to form a single Series with an existing Tranche of Notes, the Notes of such further Tranche shall be assigned a common code and ISIN and, where applicable, a CMU instrument number which are different from the common code, CMU instrument number and ISIN assigned to Notes of any other Tranche of the same Series until at least the expiry of the distribution compliance period (as defined in Regulation S under the Securities Act) applicable to the Notes of such Tranche. Any reference herein to Euroclear and/or Clearstream, Luxembourg and/or the CMU Service shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms or as may otherwise be approved by the Issuer and the Fiscal Agent. A Note may be accelerated by the holder thereof in certain circumstances described in Condition 9. In such circumstances, where any Note is still represented by a Global Note which is cleared through Euroclear and/or Clearstream, Luxembourg and/or the CMU Service and the Global Note (or any part thereof) has become due and repayable in accordance with the Conditions of such Notes and payment in full of the amount due has not been made in accordance with the provisions of the Global Note then from 8.00 p.m. (London time) on the day immediately following such day holders of interests in such Global Note credited to their accounts with Euroclear and/or Clearstream, Luxembourg and/or the CMU Service, as the case may be, will become entitled to proceed directly against the Issuer on the basis of statements of account provided by Euroclear and/or Clearstream, Luxembourg and/or the CMU Service on and subject to the terms of a deed of covenant dated 13 May 2015 (the Deed of Covenant) and executed by the Issuer. The Issuer may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, in which event a new Base Prospectus or a supplement to the Base Prospectus, if appropriate, will be made available which will describe the effect of the agreement reached in relation to such Notes. 49

52 TERMS AND CONDITIONS OF THE NOTES The following are the Terms and Conditions of the Notes which will be incorporated by reference into each Global Note (as defined below), each definitive Bearer Note and each definitive Registered Note, but, in the case of definitive Bearer Notes and definitive Registered Notes, only if permitted by the relevant stock exchange or other relevant authority (if any) and agreed by the Issuer and the relevant Dealer at the time of issue but, if not so permitted and agreed, such definitive Bearer Note or definitive Registered Note will have endorsed thereon or attached thereto such Terms and Conditions. The applicable Final Terms (or the relevant provisions thereof) will be endorsed upon, or attached to, each Global Note and definitive Note. Reference should be made to Applicable Final Terms for a description of the content of Final Terms which will specify which of such terms are to apply in relation to the relevant Notes. This Note is one of a Series (as defined below) of Notes issued by Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch (the Issuer) pursuant to the Agency Agreement (as defined below). References herein to the Notes shall be references to the Notes of this Series and shall mean: (a) (b) (c) (d) (e) in relation to any Notes represented by a global Note (a Global Note), units of the lowest Specified Denomination in the Specified Currency; any Global Note in bearer form (each a Bearer Global Note); any Global Note in registered form (each a Registered Global Note); any definitive Notes in bearer form (Definitive Bearer Notes and, together with Bearer Global Notes, the Bearer Notes) issued in exchange for a Bearer Global Note; and any definitive Notes in registered form (Definitive Registered Notes and, together with Registered Global Notes, the Registered Notes) (whether or not issued in exchange for a Registered Global Note). The Notes and the Coupons (as defined below) have the benefit of an agency agreement (such agency agreement as amended and/or supplemented and/or restated from time to time, the Agency Agreement) dated 13 May 2015 and made between the Issuer, Citibank, N.A., London Branch as agent bank (the Fiscal Agent, which expression shall include any successor fiscal agent), Citicorp International Limited as CMU lodging and paying agent (the CMU Lodging and Paying Agent, which expression shall include any successor CMU lodging and paying agent) and the other paying agents named therein (together with the Registrar (as defined below), the Fiscal Agent, acting in its capacity as paying agent, and the CMU Lodging and Paying Agent, the Paying Agents, which expression shall include any additional or successor paying agents), Citigroup Global Markets Deutschland AG as registrar (the Registrar, which expression shall include any successor registrar) and a transfer agent and the other transfer agents named therein (together with the Registrar, the Transfer Agents, which expression shall include any additional or successor transfer agents). For the purposes of these Terms and Conditions (the Conditions), all references (other than in relation to the determination of interest and other amounts payable in respect of the Notes) to the Fiscal Agent shall, with respect to a Series of Notes to be held in the CMU Service (as defined below), be deemed to be a reference to the CMU Lodging and Paying Agent and all such references shall be construed accordingly. The final terms for this Note (or the relevant provisions thereof) are set out in Part A of the Final Terms attached to or endorsed on this Note which complete these Conditions. References to the applicable Final Terms are, unless otherwise stated, to Part A of the Final Terms (or the relevant provisions thereof) attached to or endorsed on this Note. The expression Prospectus Directive means Directive 2003/71/EC (as amended, including by Directive 2010/73/EU), and includes any relevant implementing measure in a relevant Member State of the European Economic Area. 50

53 Interest-bearing Definitive Bearer Notes have interest coupons (Coupons) and, in the case of Notes which, when issued in definitive form, have more than 27 interest payments remaining, talons for further Coupons (Talons) attached on issue. Any reference herein to Coupons or coupons shall, unless the context otherwise requires, be deemed to include a reference to Talons or talons. Registered Notes and Global Notes do not have Coupons or Talons attached on issue. Any reference to Noteholders or holders in relation to any Notes shall mean, in the case of Bearer Notes, the holders of the Notes and, in the case of Registered Notes, the persons in whose name the Notes are registered and shall, in relation to any Notes represented by a Global Note, be construed as provided below. Any reference herein to Couponholders shall mean the holders of the Coupons and shall, unless the context otherwise requires, include the holders of the Talons. As used herein, Tranche means Notes which are identical in all respects (including as to listing and admission to trading) and Series means a Tranche of Notes together with any further Tranche or Tranches of Notes which are (a) expressed to be consolidated and form a single series and (b) have the same terms and conditions or terms and conditions which are the same in all respects save for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue. The Noteholders and the Couponholders are entitled to the benefit of the Deed of Covenant dated 13 May 2015 (the Deed of Covenant) and made by the Issuer. The original of the Deed of Covenant is held by the common depositary for Euroclear and Clearstream, Luxembourg (each as defined below). Copies of the Agency Agreement and the Deed of Covenant are available for inspection during normal business hours at the registered office of each of the Fiscal Agent, the Registrar and the other Paying Agents. Copies of the applicable Final Terms are available for viewing at the registered office of each the Issuer, the Fiscal Agent and the Registrar in the case of Registered Notes, and at the registered office of the other Paying Agents in the case of Bearer Notes, and copies may be obtained from those offices save that, if this Note is an unlisted Note of any Series, the applicable Final Terms will only be obtainable by a Noteholder holding one or more Notes and such Noteholder must produce evidence satisfactory to the Issuer and the relevant Paying Agent as to its holding of such Notes and identity. The Noteholders and the Couponholders are deemed to have notice of, and are entitled to the benefit of, all the provisions of the Agency Agreement, the Deed of Covenant and the applicable Final Terms which are applicable to them. The statements in the Conditions include summaries of, and are subject to, the detailed provisions of the Agency Agreement. Words and expressions defined in the Agency Agreement or used in the applicable Final Terms shall have the same meanings where used in the Conditions unless the context otherwise requires or unless otherwise stated and provided that, in the event of inconsistency between the Agency Agreement and the applicable Final Terms, the applicable Final Terms will prevail. 1. FORM, DENOMINATION AND TITLE The Notes are either in bearer form or in registered form, as specified in the applicable Final Terms and, in the case of Definitive Bearer Notes, serially numbered, in the Specified Currency and the Specified Denomination(s). Bearer Notes of one Specified Denomination may not be exchanged for Bearer Notes of another Specified Denomination and Bearer Notes may not be exchanged for Registered Notes and vice versa. This Note may be a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note or a combination of any of the foregoing, depending upon the Interest Basis shown in the applicable Final Terms. Definitive Bearer Notes are issued with Coupons attached, unless they are Zero Coupon Notes in which case references to Coupons and Couponholders in the Conditions are not applicable. 51

54 Subject as set out below, title to the Bearer Notes and Coupons will pass by delivery, and title to the Registered Notes will pass upon registration of transfers in accordance with the provisions of the Agency Agreement. The Issuer and the Paying Agents will (except as otherwise required by law) deem and treat the bearer of any Bearer Note or Coupon and the registered holder of any Registered Note as the absolute owner thereof (whether or not overdue and notwithstanding any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for all purposes but, in the case of any Global Note, without prejudice to the provisions set out in the next succeeding paragraph. For so long as any of the Notes is represented by a Global Note held on behalf of Euroclear Bank S.A./N.V. (Euroclear) and/or Clearstream Banking, société anonyme (Clearstream, Luxembourg) and/or a sub-custodian for the Central Moneymarkets Unit Service operated by the Hong Kong Monetary Authority (the CMU Service), each person (other than Euroclear, Clearstream, Luxembourg or the CMU Service) who is for the time being shown in the records of Euroclear, Clearstream, Luxembourg or the CMU Service as the holder of a particular nominal amount of such Notes (in which regard any certificate or other document issued by Euroclear, Clearstream, Luxembourg or the CMU Service as to the nominal amount of such Notes standing to the account of any person shall be conclusive and binding for all purposes save in the case of manifest error) shall be treated by the Issuer and the Paying Agents as the holder of such nominal amount of such Notes for all purposes other than with respect to the payment of principal or interest on such nominal amount of such Notes, for which purpose the bearer of the relevant Bearer Global Note or the registered holder of the relevant Registered Global Note shall be treated by the Issuer and any Paying Agent as the holder of such nominal amount of such Notes in accordance with and subject to the terms of the relevant Global Note and the expressions Noteholder and holder of Notes and related expressions shall be construed accordingly. Notwithstanding the above, if a Note (whether in global or definitive form) is held through the CMU Service, any payment that is made in respect of such Note shall be made at the direction of the bearer or the registered holder to the person(s) for whose account(s) interests in such Note are credited as being held through the CMU Service in accordance with the CMU Rules at the relevant time as notified to the CMU Lodging and Paying Agent by the CMU Service in a relevant CMU Instrument Position Report or any other relevant notification by the CMU Service (which notification, in either case, shall be conclusive evidence of the records of the CMU Service as to the identity of any accountholder and the principal amount of any Note credited to its account, save in the case of manifest error) (CMU Accountholders) and such payments shall discharge the obligation of the Issuer in respect of that payment under such Note. Notes which are represented by a Global Note will be transferable only in accordance with the rules and procedures for the time being of Euroclear, Clearstream, Luxembourg and the CMU Service, as the case may be. References to Euroclear and/or Clearstream, Luxembourg and/or the CMU Service shall, whenever the context so permits, be deemed to include a reference to any additional or alternative clearing system specified in the applicable Final Terms. 2. TRANSFERS OF REGISTERED NOTES (a) Transfers of interests in Registered Global Notes Transfers of beneficial interests in Registered Global Notes will be effected by Euroclear, Clearstream, Luxembourg or the CMU Service, as the case may be, and, in turn, by other participants and, if appropriate, indirect participants in such clearing systems acting on behalf of beneficial transferors and transferees of such interests. A beneficial interest in a Registered Global Note will, subject to compliance with all applicable legal and regulatory restrictions, be transferable for Notes in definitive form or for a beneficial interest in another Registered Global Note only in the authorised denominations set out in the applicable Final Terms and only in accordance with the rules and operating procedures for the time being of Euroclear, Clearstream, Luxembourg or the CMU Service, as the case may be, and in accordance with the terms and conditions specified in the Agency Agreement. Transfers of a Registered Global Note registered in the name of a nominee of a common depositary for Euroclear, Clearstream, Luxembourg or the CMU Service, as the case may be, shall be limited to transfers of such Registered Global Note, in whole but not in part, to another nominee of a common depositary of Euroclear, Clearstream, Luxembourg or the CMU Service, as 52

55 the case may be, or to a successor of Euroclear, Clearstream, Luxembourg or the CMU Service, as the case may be, or such successor s nominee. (b) Transfers of Registered Notes in definitive form Subject as provided in paragraph (e) below, upon the terms and subject to the conditions set forth in the Agency Agreement, a Definitive Registered Note may be transferred in whole or in part (in the authorised denominations set out in the applicable Final Terms). In order to effect any such transfer: (i) the holder or holders must: (A) (B) surrender the Registered Note for registration of the transfer of the Registered Note (or the relevant part of the Registered Note) at the specified office of any Transfer Agent, with the form of transfer thereon duly executed by the holder or holders thereof or his or their attorney or attorneys duly authorised in writing; and complete and deposit such other certifications as may be required by the relevant Transfer Agent; and (ii) the relevant Transfer Agent must be satisfied with the documents of title and the identity of the person making the request. Any such transfer will be subject to such reasonable regulations as the Issuer and the Registrar may from time to time prescribe (the initial such regulations being set out in Schedule 6 to the Agency Agreement). Subject as provided above, the relevant Transfer Agent will, within three business days (being for this purpose a day on which banks are open for business in the city where the specified office of the relevant Transfer Agent is located) of the request (or such longer period as may be required to comply with any applicable fiscal or other laws or regulations), authenticate and deliver, or procure the authentication and delivery of, at its specified office to the transferee or (at the risk of the transferee) send by uninsured mail, to such address as the transferee may request, a new Registered Note in definitive form of a like aggregate nominal amount to the Registered Note (or the relevant part of the Registered Note) transferred. In the case of the transfer of part only of a Registered Note in definitive form, a new Registered Note in definitive form in respect of the balance of the Registered Note not transferred will be so authenticated and delivered or (at the risk of the transferor) sent to the transferor. (c) Registration of transfer upon partial redemption In the event of a partial redemption of Notes under Condition 6, the Issuer shall not be required to register the transfer of any Registered Note, or part of a Registered Note, called for partial redemption. (d) Costs of registration Noteholders will not be required to bear the costs and expenses of effecting any registration of transfer as provided above, except for any costs or expenses of delivery other than by regular uninsured mail and except that the Issuer may require the payment of a sum sufficient to cover any stamp duty, tax or other governmental charge that may be imposed in relation to the registration. (e) Closed Periods No Noteholder may require the transfer of a Registered Note to be registered during the period of (a) 15 days ending on (and including) the due date for redemption of that Note and (b) seven days ending on (and including) any Record Date. (f) Exchanges and transfers of Registered Notes generally 53

56 Holders of Definitive Registered Notes may exchange such Notes for interests in a Registered Global Note of the same type at any time. 3. STATUS OF THE NOTES The Notes and any related Coupons are direct, unconditional, unsubordinated and unsecured obligations of the Issuer and rank pari passu among themselves and (save for certain obligations required to be preferred by law) equally with all other unsecured and unsubordinated obligations (other than subordinated obligations, if any) of the Issuer, from time to time outstanding. 4. INTEREST 4.1 Interest on Fixed Rate Notes Each Fixed Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date at the rate(s) per annum equal to the Rate(s) of Interest. Interest will be payable in arrear on the Interest Payment Date(s) in each year up to (and including) the Maturity Date. If the Notes are in definitive form, except as provided in the applicable Final Terms, the amount of interest payable on each Interest Payment Date in respect of the Fixed Interest Period ending on (but excluding) such date will amount to the Fixed Coupon Amount. Payments of interest on any Interest Payment Date in respect of a period that is not a Fixed Interest Period will, if so specified in the applicable Final Terms, amount to the Broken Amount so specified. As used in the Conditions, Fixed Interest Period means the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date. Except in the case of Notes in definitive form where an applicable Fixed Coupon Amount or Broken Amount is specified in the applicable Final Terms, interest shall be calculated in respect of any period by applying the Rate of Interest to: (a) (b) in the case of Fixed Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Fixed Rate Notes represented by such Global Note; or in the case of Fixed Rate Notes in definitive form, the Calculation Amount; and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Fixed Rate Note in definitive form is a multiple of the Calculation Amount, the amount of interest payable in respect of such Fixed Rate Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding. Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.1: (a) if Actual/Actual (ICMA) is specified in the applicable Final Terms: (i) in the case of Notes where the number of days in the relevant period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (the Accrual Period) is equal to or shorter than the Determination Period during which the Accrual Period ends, the number of days in such Accrual Period divided by the product of (A) the number of days in such Determination Period and (B) the 54

57 number of Determination Dates (as specified in the applicable Final Terms) that would occur in one calendar year; or (ii) in the case of Notes where the Accrual Period is longer than the Determination Period during which the Accrual Period ends, the sum of: (A) (B) the number of days in such Accrual Period falling in the Determination Period in which the Accrual Period begins divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and the number of days in such Accrual Period falling in the next Determination Period divided by the product of (x) the number of days in such Determination Period and (y) the number of Determination Dates that would occur in one calendar year; and (b) (c) (d) if 30/360 is specified in the applicable Final Terms, the number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant payment date (such number of days being calculated on the basis of a year of 360 days with day months) divided by 360; and if Actual/365 (Fixed) is specified in the applicable Final Terms, the actual number of days in the period from (and including) the most recent Interest Payment Date (or, if none, the Interest Commencement Date) to (but excluding) the relevant Interest Payment Date divided by 365. In the Conditions: Determination Period means each period from (and including) a Determination Date to (but excluding) the next Determination Date (including, where either the Interest Commencement Date or the final Interest Payment Date is not a Determination Date, the period commencing on the first Determination Date prior to, and ending on the first Determination Date falling after, such date); and sub-unit means, with respect to any currency other than euro, the lowest amount of such currency that is available as legal tender in the country of such currency and, with respect to euro, one cent. 4.2 Interest on Floating Rate Notes (a) Interest Payment Dates Each Floating Rate Note bears interest on its outstanding nominal amount from (and including) the Interest Commencement Date and such interest will be payable in arrear on either: (i) (ii) the Specified Interest Payment Date(s) in each year specified in the applicable Final Terms; or if no Specified Interest Payment Date(s) is/are specified in the applicable Final Terms, each date (each such date, together with each Specified Interest Payment Date, an Interest Payment Date) which falls the number of months or other period specified as the Specified Period in the applicable Final Terms after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement Date. Such interest will be payable in respect of each Interest Period (which expression shall, in the Conditions, mean the period from (and including) an Interest Payment Date (or the Interest Commencement Date) to (but excluding) the next (or first) Interest Payment Date). 55

58 If a Business Day Convention is specified in the applicable Final Terms and (x) if there is no numerically corresponding day in the calendar month in which an Interest Payment Date should occur or (y) if any Interest Payment Date would otherwise fall on a day which is not a Business Day, then, if the Business Day Convention specified is: (A) (B) (C) (D) in any case where Specified Periods are specified in accordance with Condition 4.2(a)(i) above, the Floating Rate Convention, such Interest Payment Date (a) in the case of (x) above, shall be the last day that is a Business Day in the relevant month and the provisions of (ii) below shall apply mutatis mutandis or (b) in the case of (y) above, shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event (i) such Interest Payment Date shall be brought forward to the immediately preceding Business Day and (ii) each subsequent Interest Payment Date shall be the last Business Day in the month which falls the Specified Period after the preceding applicable Interest Payment Date occurred; or the Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day; or the Modified Following Business Day Convention, such Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day; or the Preceding Business Day Convention, such Interest Payment Date shall be brought forward to the immediately preceding Business Day. In the Conditions, Business Day means a day which is both: I. a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in London and each Additional Business Centre specified in the applicable Final Terms; and II. (b) either (x) in relation to any sum payable in a Specified Currency other than euro and Renminbi, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency, (y) in relation to any sum payable in euro, a day on which the Trans-European Automated Real-time Gross Settlement Express Transfer (TARGET2) System (the TARGET2 System) is open or (z) in relation to any sum payable in Renminbi, a day (other than a Saturday, Sunday or public holiday) on which commercial banks and foreign exchange markets are open for business and settlement of Renminbi payments in the Offshore Renminbi Centre. Rate of Interest The Rate of Interest payable from time to time in respect of Floating Rate Notes will be determined in the manner specified in the applicable Final Terms. (i) ISDA Determination for Floating Rate Notes Where ISDA Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will be the relevant ISDA Rate plus or minus (as indicated in the applicable Final Terms) the Margin (if any). For the purposes of this subparagraph (i), ISDA Rate for an Interest Period means a rate equal to the Floating Rate that would be determined by the Fiscal Agent under an interest rate swap transaction if the Fiscal Agent were acting as Calculation Agent for that swap transaction under the terms of an agreement incorporating the 2006 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc. (ISDA) and as amended and updated as at the Issue Date of the first Tranche of the Notes (the ISDA Definitions) and under which: 56

59 (A) (B) (C) the Floating Rate Option is as specified in the applicable Final Terms; the Designated Maturity is a period specified in the applicable Final Terms; and the relevant Reset Date is either (I) if the applicable Floating Rate Option is based on the London interbank offered rate (LIBOR), on the Euro-zone interbank offered rate (EURIBOR) or on the CNH Hong Kong inter-bank offered rate (CNH HIBOR), the first day of that Interest Period or (II) in any other case, as specified in the applicable Final Terms. For the purposes of this subparagraph (i), Floating Rate, Calculation Agent, Floating Rate Option, Designated Maturity and Reset Date have the meanings given to those terms in the ISDA Definitions. Unless otherwise stated in the applicable Final Terms, the Minimum Rate of Interest shall be deemed to be zero. (ii) Screen Rate Determination for Floating Rate Notes Where Screen Rate Determination is specified in the applicable Final Terms as the manner in which the Rate of Interest is to be determined, the Rate of Interest for each Interest Period will, subject as provided below, be either: (A) (B) the offered quotation; or the arithmetic mean (rounded if necessary to the fifth decimal place, with being rounded upwards) of the offered quotations, (expressed as a percentage rate per annum) for the Reference Rate (as specified in the applicable Final Terms) which appears or appear, as the case may be, on the Relevant Screen Page (or such replacement page on that service which displays the information) as at the Relevant Time on the Interest Determination Date in question plus or minus (as indicated in the applicable Final Terms) the Margin (if any), all as determined by the Fiscal Agent. If five or more of such offered quotations are available on the Relevant Screen Page, the highest (or, if there is more than one such highest quotation, one only of such quotations) and the lowest (or, if there is more than one such lowest quotation, one only of such quotations) shall be disregarded by the Fiscal Agent for the purpose of determining the arithmetic mean (rounded as provided above) of such offered quotations. If the Relevant Screen Page is not available or if, in the case of subclause 4.2(b)(ii)(A) above, no offered quotation appears or, in the case of subclause 4.2(b)(ii)(B) above, fewer than three offered quotations appear, in each case as at the Relevant Time, the Fiscal Agent shall request each of the Reference Banks to provide the Fiscal Agent with its offered quotation (expressed as a percentage rate per annum) for the Reference Rate at approximately the Specified Time on the Interest Determination Date in question. If two or more of the Reference Banks provide the Fiscal Agent with offered quotations, the Rate of Interest for the Interest Period shall be the arithmetic mean (rounded if necessary to the fifth decimal place with being rounded upwards) of the offered quotations plus or minus (as appropriate) the Margin (if any), all as determined by the Fiscal Agent. If on any Interest Determination Date one only or none of the Reference Banks provides the Fiscal Agent with an offered quotation as provided in the preceding paragraph, the Rate of Interest for the relevant Interest Period shall be the rate per annum which the Fiscal Agent determines as being the arithmetic mean (rounded if necessary to the fifth decimal place, with being rounded upwards) of the rates, as communicated to (and at the request of) the Fiscal Agent by the Reference Banks or any two or more of them, at which such banks were offered, at approximately the Specified Time on the relevant Interest Determination Date, deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate by leading banks in the London interbank market (if the Reference Rate is LIBOR, LIMEAN, LIBID, AUD LIBOR, JPY LIBOR), or the Euro-zone inter-bank market (if the Reference Rate is EURIBOR), or by leading banks dealing in Renminbi in the Hong Kong inter-bank market (if the Reference Rate is CNH HIBOR), or the Shanghai inter-bank market (if the Reference Rate is SHIBOR), or the Singapore inter-bank market (if the Reference Rate is SIBOR), or the Kuala Lumpur inter-bank market (if the Reference Rate is KLIBOR), or the Emirates inter-bank market (if the Reference Rate is EIBOR), or 57

60 the Saudi Arabia inter-bank market (if the Reference Rate is SAIBOR), or the Australia inter-bank market (if the Reference Rate is BBSW), or the Prague inter-bank market (if the Reference Rate is PRIBOR), or the Turkish interbank market (if the Reference Rate is TRLIBOR or TRYLIBOR), or the Tokyo inter-bank market (if the Reference Rate is TIBOR), plus or minus (as appropriate) the Margin (if any) or, if fewer than two of the Reference Banks provide the Fiscal Agent with offered rates, the offered rate for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, or the arithmetic mean (rounded as provided above) of the offered rates for deposits in the Specified Currency for a period equal to that which would have been used for the Reference Rate, at which, at approximately the Specified Time on the relevant Interest Determination Date, any one or more banks (which bank or banks is or are in the opinion of the Issuer suitable for the purpose) informs the Fiscal Agent it is quoting to leading banks in the London inter-bank market (if the Reference Rate is LIBOR, LIMEAN, LIBID, AUD LIBOR, JPY LIBOR), or the Euro-zone inter-bank market (if the Reference Rate is EURIBOR) or leading banks dealing in Renminbi in the Hong Kong inter-bank market (if the Reference Rate is CNH HIBOR), or the Shanghai inter-bank market (if the Reference Rate is SHIBOR), or the Singapore inter-bank market (if the Reference Rate is SIBOR), or the Kuala Lumpur inter-bank market (if the Reference Rate is KLIBOR), or the Emirates inter-bank market (if the Reference Rate is EIBOR), or the Saudi Arabia inter-bank market (if the Reference Rate is SAIBOR), or the Australia inter-bank market (if the Reference Rate is BBSW), or the Prague inter-bank market (if the Reference Rate is PRIBOR), or the Turkish inter-bank market (if the Reference Rate is TRLIBOR or TRYLIBOR), or the Tokyo inter-bank market (if the Reference Rate is TIBOR), plus or minus (as appropriate) the Margin (if any), provided that, if the Rate of Interest cannot be determined in accordance with the foregoing provisions of this paragraph, the Rate of Interest shall be determined as at the last preceding Interest Determination Date (though substituting, where a different Margin is to be applied to the relevant Interest Period from that which applied to the last preceding Interest Period, the Margin relating to the relevant Interest Period in place of the Margin relating to that last preceding Interest Period). In the Conditions: Reference Banks means, in the case of a determination of LIBOR, LIMEAN, LIBID, AUD LIBOR or JPY LIBOR, the principal London office of four major banks in the London inter-bank market, in the case of a determination of EURIBOR, the principal Euro-zone office of four major banks in the Euro-zone inter-bank market, in the case of a determination of SHIBOR, the principal Shanghai office of four major banks in the Shanghai inter-bank market, in the case of a determination of HIBOR or CNH HIBOR, the principal Hong Kong office of four major banks in the Hong Kong inter-bank market, in the case of a determination of SIBOR, the principal Singapore office of four major banks in the Singapore inter-bank market, in the case of a determination KLIBOR, the principal Kuala Lumpur office of four major banks in the Kuala Lumpur inter-bank market, in the case of a determination of EIBOR, the principal Dubai office of four major banks in the Emirates inter-bank market, in the case of a determination of SAIBOR, the principal Riyadh office of four major banks in the Saudi Arabia inter-bank market, in the case of a determination of BBSW, the principal Sydney office of four major banks in the Australia inter-bank market, in the case of a determination of PRIBOR, the principal Prague office of four major banks in the Prague inter-bank market, in the case of a determination of TRLIBOR or TRYLIBOR, the principal Istanbul office of four major banks in the Turkish inter-bank market, or in the case of a determination of TIBOR, the principal Tokyo office of four major banks in the Tokyo inter-bank market and, in the case of a determination of a Reference Rate that is not specified above, the principal office of four major banks in the inter-bank market of the Relevant Financial Centre, in each case selected by the Fiscal Agent; Reference Rate means one of the following benchmark rates (as specified in the applicable Final Terms) in respect of the currency and period specified in the applicable Final Terms: (A) (B) (C) Euro interbank offered rate (EURIBOR); London interbank bid rate (LIBID); London interbank offered rate (LIBOR); 58

61 (D) (E) (F) (G) (H) (I) (J) (K) (L) (M) (N) (O) (P) (Q) London interbank mean rate (LIMEAN); Shanghai interbank offered rate (SHIBOR); Hong Kong interbank offered rate (HIBOR); Singapore interbank offered rate (SIBOR); Kuala Lumpur interbank offered rate (KLIBOR); Emirates interbank offered rate (EIBOR); Saudi Arabia interbank offered rate (SAIBOR); Bank Bill Swap Rate (BBSW); Australian dollar LIBOR (AUD LIBOR); Japanese Yen LIBOR (JPY LIBOR); Prague interbank offered rate (PRIBOR); CNH Hong Kong interbank offered rate (CNH HIBOR); Turkish Lira interbank offered rate (TRLIBOR or TRYLIBOR); and Tokyo interbank offered rate (TIBOR); Relevant Financial Centre shall mean (i) London, in the case of a determination of LIBOR; (ii) Brussels, in the case of a determination of EURIBOR; (iii) Tokyo, in the case of a determination of TIBOR; or (iv) Hong Kong, in the case of a determination of HIBOR or CNH HIBOR, as specified in the applicable Final Terms, or (v) such other financial centre as specified in the relevant Final Terms; Relevant Screen Page means such page, section, caption, column or other part of a particular information service as may be specified in the applicable Final Terms or such other page, section, caption, column or other part as may replace it on that information service or such other information service, in each case, as may be nominated by the person providing or sponsoring the information appearing there for the purpose of displaying rates or prices comparable to the Reference Rate; and Relevant Time means: (a) a.m. (London time, in the case of a determination of LIBOR, LIMEAN, LIBID, AUD LIBOR, JPY LIBOR, Brussels time, in the case of a determination of EURIBOR, Shanghai time, in the case of a determination of SHIBOR, Hong Kong time, in the case of a determination of HIBOR, Singapore time, in the case of a determination of SIBOR, Kuala Lumpur time, in the case of a determination of KLIBOR, Dubai time, in the case of a determination of EIBOR, Riyadh time, in the case of a determination of SAIBOR, Sydney time, in the case of a determination of BBSW, Prague time, in the case of a determination of PRIBOR, Istanbul time, in the case of a determination of TRLIBOR or TRYLIBOR, or Tokyo time, in the case of a determination of TIBOR); or (b) a.m. Hong Kong time in the case of a determination of CNH HIBOR; or (c) Relevant Financial Centre time in the case of a determination of any other Reference Rate. (c) Minimum Rate of Interest and/or Maximum Rate of Interest If the applicable Final Terms specifies a Minimum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is less than such Minimum Rate of Interest, the Rate of Interest for such Interest Period shall be such Minimum Rate of Interest. 59

62 If the applicable Final Terms specifies a Maximum Rate of Interest for any Interest Period, then, in the event that the Rate of Interest in respect of such Interest Period determined in accordance with the provisions of paragraph (b) above is greater than such Maximum Rate of Interest, the Rate of Interest for such Interest Period shall be such Maximum Rate of Interest. (d) Determination of Rate of Interest and calculation of Interest Amounts The Fiscal Agent or, as applicable, the Registrar, in the case of Floating Rate Notes will at or as soon as practicable after each time at which the Rate of Interest is to be determined, determine the Rate of Interest for the relevant Interest Period. The Fiscal Agent or, as applicable, the Registrar, in the case of Floating Rate Notes, will calculate the amount of interest (the Interest Amount) payable on the Floating Rate Notes in respect of each Specified Denomination for the relevant Interest Period. Each Interest Amount shall be calculated by applying the Rate of Interest to: (i) (ii) in the case of Floating Rate Notes which are represented by a Global Note, the aggregate outstanding nominal amount of the Notes represented by such Global Note; or in the case of Floating Rate Notes in definitive form, the Calculation Amount, and, in each case, multiplying such sum by the applicable Day Count Fraction, and rounding the resultant figure to the nearest sub-unit of the relevant Specified Currency, half of any such sub-unit being rounded upwards or otherwise in accordance with applicable market convention. Where the Specified Denomination of a Floating Rate Note in definitive form is a multiple of the Calculation Amount, the Interest Amount payable in respect of such Note shall be the product of the amount (determined in the manner provided above) for the Calculation Amount and the amount by which the Calculation Amount is multiplied to reach the Specified Denomination, without any further rounding. Day Count Fraction means, in respect of the calculation of an amount of interest in accordance with this Condition 4.2: (i) (ii) (iii) (iv) (v) if Actual/Actual (ISDA) or Actual/Actual is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 (or, if any portion of that Interest Period falls in a leap year, the sum of (A) the actual number of days in that portion of the Interest Period falling in a leap year divided by 366 and (B) the actual number of days in that portion of the Interest Period falling in a non-leap year divided by 365); if Actual/365 (Fixed) is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365; if Actual/365 (Sterling) is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 365 or, in the case of an Interest Payment Date falling in a leap year, 366; if Actual/360 is specified in the applicable Final Terms, the actual number of days in the Interest Period divided by 360; if 30/360, 360/360 or Bond Basis is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction where: 360 Y - Y 30 M M D D

63 Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless such number is 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31 and D 1 is greater than 29, in which case D 2 will be 30; (vi) if 30E/360 or Eurobond Basis is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction where: 360 Y - Y 30 M M D D Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless such number would be 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless such number would be 31, in which case D 2 will be 30; 1 (vii) if 30E/360 (ISDA) is specified in the applicable Final Terms, the number of days in the Interest Period divided by 360, calculated on a formula basis as follows: Day Count Fraction where: 360 Y - Y 30 M M D D Y 1 is the year, expressed as a number, in which the first day of the Interest Period falls; Y 2 is the year, expressed as a number, in which the day immediately following the last day of the Interest Period falls; M 1 is the calendar month, expressed as a number, in which the first day of the Interest Period falls; 1 61

64 M 2 is the calendar month, expressed as a number, in which the day immediately following the last day of the Interest Period falls; D 1 is the first calendar day, expressed as a number, of the Interest Period, unless (A) that day is the last day of February or (B) such number would be 31, in which case D 1 will be 30; and D 2 is the calendar day, expressed as a number, immediately following the last day included in the Interest Period, unless (A) that day is the last day of February but not the Maturity Date or (viii) such number would be 31, in which case D 2 will be 30. (e) Notification of Rate of Interest and Interest Amounts The Fiscal Agent or the Registrar will cause the Rate of Interest and each Interest Amount for each Interest Period and the relevant Interest Payment Date to be notified to the Issuer (by no later than the first day of each Interest Period) and notice thereof to be published in accordance with Condition 13 as soon as possible after their determination but in no event later than the fourth London Business Day thereafter. Each Interest Amount and Interest Payment Date so notified may subsequently be amended (or appropriate alternative arrangements made by way of adjustment) without prior notice in the event of an extension or shortening of the Interest Period. Any such amendment will be promptly notified to each stock exchange on which the relevant Floating Rate Notes are for the time being listed and to the Noteholders in accordance with Condition 13. For the purposes of this paragraph, the expression London Business Day means a day (other than a Saturday or a Sunday) on which banks and foreign exchange markets are open for general business in London. (f) Certificates to be final All certificates, communications, opinions, determinations, calculations, quotations and decisions given, expressed, made or obtained for the purposes of the provisions of this Condition 4.2, whether by the Fiscal Agent or the Registrar shall (in the absence of wilful default, fraud, manifest error or proven error) be binding on the Issuer, the Fiscal Agent, the Registrar (if applicable), the other Paying Agents and all Noteholders and Couponholders and (in the absence of negligence, wilful default or fraud) no liability to the Issuer, the Noteholders or the Couponholders shall attach to the Fiscal Agent or the Registrar in connection with the exercise or non-exercise by it of its powers, duties and discretions pursuant to such provisions. 4.3 Accrual of interest Each Note (or in the case of the redemption of part only of a Note, that part only of such Note) will cease to bear interest (if any) from the date for its redemption unless, upon due presentation thereof, payment of principal is improperly withheld or refused. In such event, interest will continue to accrue until whichever is the earlier of: (a) (b) the date on which all amounts due in respect of such Note have been paid; and seven days after the date on which the full amount of the moneys payable in respect of such Note has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders in accordance with Condition PAYMENTS 5.1 Method of payment Subject as provided below: (a) payments in a Specified Currency other than euro and Renminbi will be made by credit or transfer to an account in the relevant Specified Currency maintained by the payee with, or, at the option of the payee, by 62

65 a cheque in such Specified Currency drawn on, a bank in the principal financial centre of the country of such Specified Currency; (b) (c) payments in euro will be made by credit or transfer to a euro account (or any other account to which euro may be credited or transferred) specified by the payee or, at the option of the payee, by a euro cheque; and payments in Renminbi will be made by transfer to a Renminbi account maintained by or on behalf of the relevant Noteholder with a bank in the Offshore Renminbi Centre. Payments will be subject in all cases to (i) any fiscal or other laws and regulations applicable thereto in the place of payment, but without prejudice to the provisions of Condition 7 and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the Code) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations thereunder, official interpretations thereof, or any law implementing an intergovernmental approach thereto. For the purpose of the Conditions, the term Renminbi means the lawful currency of the People s Republic of China. 5.2 Presentation of Definitive Bearer Notes and Coupons Payments of principal in respect of Definitive Bearer Notes not held in the CMU Service will (subject as provided below) be made in the manner provided in Condition 5.1 above only against presentation and surrender (or, in the case of part-payment of any sum due, endorsement) of Definitive Bearer Notes, and payments of interest in respect of Definitive Bearer Notes will (subject as provided below) be made as aforesaid only against presentation and surrender (or, in the case of part-payment of any sum due, endorsement) of Coupons, in each case at the specified office of any Paying Agent outside the United States (which expression, as used herein, means the United States of America (including the States and the District of Columbia, its territories, its possessions and other areas subject to its jurisdiction)). Fixed Rate Notes in definitive bearer form not held in the CMU Service (other than Long Maturity Notes (as defined below)) should be presented for payment together with all unmatured Coupons appertaining thereto (which expression shall for this purpose include Coupons falling to be issued on exchange of matured Talons), failing which the amount of any missing unmatured Coupon (or, in the case of payment not being made in full, the same proportion of the amount of such missing unmatured Coupon as the sum so paid bears to the sum due) will be deducted from the sum due for payment. Each amount of principal so deducted will be paid in the manner mentioned above against surrender of the relative missing Coupon at any time before the expiry of ten years after the Relevant Date (as defined in Condition 7) in respect of such principal (whether or not such Coupon would otherwise have become void under Condition 8) or, if later, five years from the date on which such Coupon would otherwise have become due, but in no event thereafter. Upon any Fixed Rate Note in definitive bearer form becoming due and repayable prior to its Maturity Date, all unmatured Talons (if any) appertaining thereto will become void and no further Coupons will be issued in respect thereof. Upon the date on which any Floating Rate Note or Long Maturity Note in definitive bearer form not held in the CMU Service becomes due and repayable, unmatured Coupons and Talons (if any) relating thereto (whether or not attached) shall become void and no payment or, as the case may be, exchange for further Coupons shall be made in respect thereof. A Long Maturity Note is a Fixed Rate Note (other than a Fixed Rate Note which on issue had a Talon attached) whose nominal amount on issue is less than the aggregate interest payable thereon provided that such Note shall cease to be a Long Maturity Note on the Interest Payment Date on which the aggregate amount of interest remaining to be paid after that date is less than the nominal amount of such Note. In the case of Definitive Bearer Notes held in the CMU Service, payment will be made to the person(s) for whose account(s) interests in the relevant Definitive Bearer Note are credited as being held with the CMU Service in 63

66 accordance with the CMU Rules at the relevant time as notified to the CMU Lodging and Paying Agent by the CMU Service in a relevant CMU Instrument Position Report or any relevant notification by the CMU Service, which notification shall be conclusive evidence of the records of the CMU Service (save in the case of manifest error) and payment made in accordance thereof shall discharge the obligations of the Issuer in respect of that payment. If the due date for redemption of any Definitive Bearer Note is not an Interest Payment Date, interest (if any) accrued in respect of such Note from (and including) the preceding Interest Payment Date or, as the case may be, the Interest Commencement Date shall be payable only against surrender of the relevant Definitive Bearer Note. 5.3 Payments in respect of Bearer Global Notes Payments of principal and interest (if any) in respect of Bearer Notes represented by any Global Note will (subject as provided below) be made in the manner specified above in relation to Definitive Bearer Notes and otherwise in the manner specified in the relevant Global Note (i) in the case of a Bearer Global Note lodged with the CMU Service, to the person(s) for whose account(s) interests in the relevant Bearer Global Note are credited as being held by the CMU Service in accordance with the CMU Rules, or (ii) in the case of a Bearer Global Note not lodged with the CMU Service, against presentation or surrender, as the case may be, of such Global Note at the specified office of any Paying Agent outside the United States. A record of each payment made against presentation or surrender of any Global Note in bearer form, distinguishing between any payment of principal and any payment of interest, will be made on such Global Note by the Paying Agent to which it was presented or in the records of Euroclear and Clearstream, Luxembourg and such record shall be prima facie evidence that the payment in question has been made. A record of each payment made against presentation or surrender of any Bearer Global Note, distinguishing between any payment of principal and any payment of interest, will be made (in the case of a Global Note not lodged with the CMU Service) on such Bearer Global Note by the Paying Agent to which it was presented or (in the case of a Global Note lodged with the CMU Service) on withdrawal of the Bearer Global Note by the CMU Lodging and Paying Agent, and in each such case such record shall be prima facie evidence that the payment in question has been made. 5.4 Payments in respect of Registered Notes Payments of principal in respect of each Registered Note (whether or not in global form) will be made against presentation and surrender (or, in the case of part-payment of any sum due, endorsement) of the Registered Note at the specified office of the Registrar or any of the Paying Agents. Such payments will be made by transfer to the Designated Account (as defined below) of the holder (or the first named of joint holders) of the Registered Note appearing in the register of holders of the Registered Notes maintained by the Registrar (the Register) (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business and, in respect of the Notes clearing through the CMU Service, a day on which the CMU is open for business) before the relevant due date and (ii) where in definitive form at the close of business on the third business day (being for this purpose a day on which banks are open for business in the city where the specified office of the Registrar is located) before the relevant due date. Notwithstanding the previous sentence, if: (a) a holder does not have a Designated Account; or (b) the principal amount of the Notes held by a holder is less than US$250,000 (or its approximate equivalent in any other Specified Currency), payment will instead be made by a cheque in the Specified Currency drawn on a Designated Bank (as defined below). For these purposes, Designated Account means the account (which, in the case of a payment in Japanese yen to a non-resident of Japan, shall be a non-resident account) maintained by a holder with a Designated Bank and identified as such in the Register and, in the case of a payment in Renminbi, means the Renminbi account maintained by or on behalf of the Noteholder with a bank in the Offshore Renminbi Centre, details of which appear on the Register at the close of business on the fifth business day before the due date for payment) maintained by a holder with a Designated Bank and identified as such in the Register and Designated Bank means (in the case of payment in a Specified Currency other than euro and Renminbi) a bank in the principal financial centre of the country of such Specified Currency, (in the case of a payment in euro) any bank which processes payments in euro and (in the case of a payment in 64

67 Renminbi) any bank in the Offshore Renminbi Centre which processes payments in Renminbi in the Offshore Renminbi Centre. Payments of interest in respect of each Registered Note (whether or not in global form) will be made by a cheque in the Specified Currency drawn on a Designated Bank and mailed by uninsured mail on the business day in the city where the specified office of the Registrar is located immediately preceding the relevant due date to the holder (or the first named of joint holders) of the Registered Note appearing in the Register (i) where in global form, at the close of the business day (being for this purpose a day on which Euroclear and Clearstream, Luxembourg are open for business and, in respect of the Notes clearing through the CMU Service, a day on which CMU is open for business) before the relevant due date and (ii) where in definitive form, at the close of business on the fifth day or (in the case of Renminbi) the 15th day (whether or not such fifth or 15th day is a business day) before the relevant due date (the Record Date) at his address shown in the Register on the Record Date and at his risk. Upon application of the holder to the specified office of the Registrar not less than three business days in the city where the specified office of the Registrar is located before the due date for any payment of interest in respect of a Registered Note, the payment may be made by transfer on the due date in the manner provided in the preceding paragraph. Any such application for transfer shall be deemed to relate to all future payments of interest (other than interest due on redemption) in respect of the Registered Notes which become payable to the holder who has made the initial application until such time as the Registrar is notified in writing to the contrary by such holder. Payment of the interest due in respect of each Registered Note on redemption will be made in the same manner as payment of the principal amount of such Registered Note. In the case of Definitive Registered Notes or Registered Global Notes held through the CMU Service, payment will be made at the direction of the registered holder to the CMU Accountholders and such payment shall discharge the obligation of the Issuer in respect of that payment. Holders of Registered Notes will not be entitled to any interest or other payment for any delay in receiving any amount due in respect of any Registered Note as a result of a cheque posted in accordance with this Condition arriving after the due date for payment or being lost in the post. No commissions or expenses shall be charged to such holders by the Registrar in respect of any payments of principal or interest in respect of the Registered Notes. None of the Issuer or the Paying Agents or the Transfer Agents will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Registered Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. 5.5 General provisions applicable to payments The holder of a Global Note (if the Global Note is not lodged with the CMU Service) or (if the Global Note is lodged with the CMU Service) the person(s) for whose account(s) interests in such Global Note are credited as being held in the CMU Service in accordance with the CMU Rules as notified to the CMU Lodging and Paying Agent by the CMU Service in a relevant CMU Instrument Position Report or any other relevant notification by the CMU Service (which notification, in either case, shall be conclusive evidence of the records of the CMU Service save in the case of manifest error), shall be the only person(s) entitled to receive payments in respect of Notes represented by such Global Note and the Issuer will be discharged by payment to, or to the order of, the holder of such Global Note or by payment to, or to the order of, the holder of such Global Note or such person(s) for whose account(s) interests in such Global Note are credited as being held in the CMU Service (as the case may be) in respect of each amount so paid. Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or the CMU Service as the beneficial holder of a particular nominal amount of Notes represented by such Global Note must look solely to Euroclear, Clearstream, Luxembourg or the CMU Lodging and Paying Agent, as the case may be, for his share of each payment so made by the Issuer or to the order of, the holder of such Global Note. 65

68 Notwithstanding the foregoing provisions of this Condition, if any amount of principal and/or interest in respect of Notes is payable in U.S. dollars, such U.S. dollar payments of principal and/or interest in respect of such Notes will be made at the specified office of a Paying Agent in the United States if: (a) (b) (c) the Issuer has appointed Paying Agents with specified offices outside the United States with the reasonable expectation that such Paying Agents would be able to make payment in U.S. dollars at such specified offices outside the United States of the full amount of principal and interest on the Notes in the manner provided above when due; payment of the full amount of such principal and interest at all such specified offices outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions on the full payment or receipt of principal and interest in U.S. dollars; and such payment is then permitted under United States law without involving, in the opinion of the Issuer, adverse tax consequences to the Issuer. 5.6 Payment Day If the date for payment of any amount in respect of any Note or Coupon is not a Payment Day, the holder thereof shall not be entitled to payment until the next following Payment Day in the relevant place and shall not be entitled to further interest or other payment in respect of such delay. For these purposes, Payment Day means any day which (subject to Condition 8) is: (a) in the case of Notes or Coupons denominated in a Specified Currency other than Renminbi: (i) a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in: (A) (B) in the case of Notes in definitive form only, the relevant place of presentation; or each Additional Financial Centre specified in the applicable Final Terms; and (ii) either (i) in relation to any sum payable in a Specified Currency other than euro, a day on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in the principal financial centre of the country of the relevant Specified Currency or (ii) in relation to any sum payable in euro, a day on which the TARGET2 System is open; and (b) in the case of Notes or Coupons denominated in Renminbi, a day on which commercial banks and foreign exchange markets settle Renminbi payments and are open for general business (including dealing in foreign exchange and foreign currency deposits) in (i) in the case of Notes in definitive form only, the relevant place of presentation and (ii) the Offshore Renminbi Centre. 5.7 Interpretation of principal and interest Any reference in the Conditions to principal in respect of the Notes shall be deemed to include, as applicable (without double counting): (a) any additional amounts which may be payable with respect to principal under Condition 7; (b) (c) the Final Redemption Amount of the Notes; the Early Redemption Amount of the Notes; 66

69 (d) (e) (f) the Optional Redemption Amount(s) (if any) of the Notes; in relation to Zero Coupon Notes, the Amortised Face Amount (as defined in Condition 6.5); and any premium and any other amounts (other than interest) which may be payable by the Issuer under or in respect of the Notes. Any reference in the Conditions to interest in respect of the Notes shall be deemed to include, as applicable, any additional amounts which may be payable with respect to interest under Condition REDEMPTION AND PURCHASE 6.1 Redemption at maturity Unless previously redeemed or purchased and cancelled as specified below, each Note will be redeemed by the Issuer at its Final Redemption Amount specified in, or determined in the manner specified in, the applicable Final Terms in the relevant Specified Currency on the Maturity Date. 6.2 Redemption for tax reasons The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time (if this Note is not a Floating Rate Note) or on any Interest Payment Date (if this Note is a Floating Rate Note), on giving not less than 30 nor more than 60 days notice to the Fiscal Agent and, in accordance with Condition 13, the Noteholders (which notice shall be irrevocable), if: (a) (b) on the occasion of the next payment due under the Notes, the Issuer has or will become obliged to pay additional amounts as provided or referred to in Condition 7 as a result of any change in, or amendment to, the laws or regulations of a Tax Jurisdiction (as defined in Condition 7) or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after the date on which agreement is reached to issue the first Tranche of the Notes; and such obligation cannot be avoided by the Issuer taking reasonable measures available to it, provided that no such notice of redemption shall be given earlier than 90 days prior to the earliest date on which the Issuer would be obliged to pay such additional amounts were a payment in respect of the Notes then due. Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer shall deliver to the Fiscal Agent a certificate signed by two authorised signatories of the Issuer stating that the Issuer is entitled to effect such redemption and setting forth a statement of facts showing that the conditions precedent to the right of the Issuer so to redeem have occurred, and an opinion of independent legal or tax advisers of recognised standing to the effect that the Issuer has or will become obliged to pay such additional amounts as a result of such change or amendment. Notes redeemed pursuant to this Condition 6.2 will be redeemed at their Early Redemption Amount referred to in Condition 6.5 below together (if appropriate) with interest accrued to (but excluding) the date of redemption. 6.3 Redemption at the option of the Issuer (Issuer Call) If Issuer Call is specified in the applicable Final Terms, the Issuer may, having given: (a) (b) not less than 32 nor more than 60 days notice to the Noteholders (in accordance with Condition 13); and not less than 15 days before the giving of the notice referred to in (a) above, notice to the Fiscal Agent and, in the case of a redemption of Registered Notes, the Registrar, 67

70 (which notices shall be irrevocable and shall specify the date fixed for redemption), redeem all or some only of the Notes then outstanding on any Optional Redemption Date and at the Optional Redemption Amount(s) specified in, or determined in the manner specified in, the applicable Final Terms together, if appropriate, with interest accrued to (but excluding) the relevant Optional Redemption Date. Any such redemption must be of a nominal amount not less than the Minimum Redemption Amount and not more than the Maximum Redemption Amount, in each case as may be specified in the applicable Final Terms. In the case of a partial redemption of Definitive Bearer Notes or Definitive Registered Notes, the Notes to be redeemed (Redeemed Notes) will be selected individually by lot (in such place as the Fiscal Agent, in the case of Bearer Notes, or the Registrar, in the case of Registered Notes, may approve) not more than 60 days prior to the date fixed for redemption and a list of the Notes called for redemption will be given notice in accordance with Condition 13 not less than 30 days prior to such date fixed for redemption (such date of selection being the Selection Date). In the case of partial redemption of Notes which are represented by a Global Note, the relevant Notes will be selected in accordance with the rules of Euroclear and/or Clearstream, Luxembourg and/or the CMU Service (as appropriate). If only some of the Notes then outstanding are to be so redeemed, the Optional Redemption Amount (after accounting for any interest accrued to (but excluding) the relevant Optional Redemption Date) shall be an amount that is (i) equal to or greater than the Minimum Redemption Amount and (ii) equal to or less than the Maximum Redemption Amount. In the case of Redeemed Notes represented by definitive Notes, a list of the serial numbers of such Redeemed Notes will be published in accordance with Condition 13 not less than 15 days prior to the date fixed for redemption. No exchange of the relevant Global Note will be permitted during the period from (and including) the Selection Date to (and including) the date fixed for redemption pursuant to this Condition 6.3 and notice to that effect shall be given by the Issuer to the Noteholders in accordance with Condition 13 at least five days prior to the Selection Date. 6.4 Redemption at the option of the Noteholders (Investor Put) If Investor Put is specified in the applicable Final Terms, upon the holder of any Note giving to the Issuer in accordance with Condition 13 not less than 32 nor more than 60 days notice the Issuer will, upon the expiry of such notice, redeem, subject to, and in accordance with, the terms specified in the applicable Final Terms, such Note on the Optional Redemption Date at the Optional Redemption Amount together, if appropriate, with interest accrued to (but excluding) the Optional Redemption Date. Registered Notes may be redeemed under this Condition 6.4 in any multiple of their lowest Specified Denomination. It may be that before an Investor Put can be exercised, certain conditions and/or circumstances will need to be satisfied. Where relevant, the provisions will be set out in the applicable Final Terms. To exercise the right to require redemption of this Note the holder of this Note must, if this Note is in definitive form and held outside Euroclear, Clearstream, Luxembourg or the CMU Service, deliver, at the specified office of any Paying Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes) at any time during the normal business hours of such Paying Agent or, as the case may be, the Registrar falling within the notice period, a duly completed and signed notice of exercise in the form (for the time being current) obtainable from any specified office of any Paying Agent or, as the case may be, the Registrar (a Put Notice) and in which the holder must specify a bank account (or, if payment is required to be made by cheque, an address) to which payment is to be made under this Condition and, in the case of Registered Notes, the nominal amount thereof to be redeemed and, if less than the full nominal amount of the Registered Notes so surrendered is to be redeemed, an address to which a new Registered Note in respect of the balance of such Registered Notes is to be sent subject to and in accordance with the provisions of Condition 2(b). If this Note is a Definitive Bearer Note, the Put Notice must be accompanied by this Note or evidence satisfactory to the Paying Agent concerned that this Note will, following delivery of the Put Notice, be held to its order or under its control. 68

71 If this Note is represented by a Global Note or is in definitive form and held through Euroclear, Clearstream, Luxembourg or the CMU Service, to exercise the right to require redemption of this Note the holder of this Note must, within the notice period, give notice to the Fiscal Agent of such exercise in accordance with the standard procedures of Euroclear, Clearstream, Luxembourg or the CMU Service (which may include notice being given on his instruction by Euroclear, Clearstream, Luxembourg or the CMU Service or any depositary for them to the Fiscal Agent by electronic means) in a form acceptable to Euroclear, Clearstream, Luxembourg or the CMU Service from time to time and, if this Note is represented by a Global Note, at the same time present or procure the presentation of the relevant Global Note to the Fiscal Agent for notation accordingly. Any Put Notice or other notice given in accordance with the standard procedures of Euroclear, Clearstream, Luxembourg or the CMU Service given by a holder of any Note pursuant to this Condition 6.4 shall be irrevocable except where, prior to the due date of redemption, an Event of Default has occurred and is continuing, in which event such holder, at its option, may elect by notice to the Issuer to withdraw the notice given pursuant to this Condition 6.4 and instead to declare such Note forthwith due and payable pursuant to Condition Early Redemption Amounts For the purpose of Condition 6.2 above and Condition 9, each Note will be redeemed at its Early Redemption Amount calculated as follows: (a) (b) (c) in the case of a Note (other than a Zero Coupon Note) with a Final Redemption Amount equal to the Issue Price, at the Final Redemption Amount thereof; in the case of a Note (other than a Zero Coupon Note) with a Final Redemption Amount which is or may be less or greater than the Issue Price or which is payable in a Specified Currency other than that in which the Note is denominated, at the amount specified in, or determined in the manner specified in, the applicable Final Terms or, if no such amount or manner is so specified in the applicable Final Terms, at its nominal amount; or in the case of a Zero Coupon Note, at an amount (the Amortised Face Amount) calculated in accordance with the following formula: y Early Redemption Amount = RP (1+ AY) where: RP AY means the Reference Price; means the Accrual Yield expressed as a decimal; and y is a fraction the numerator of which is equal to the number of days (calculated on the basis of a 360-day year consisting of 12 months of 30 days each) from (and including) the Issue Date of the first Tranche of the Notes to (but excluding) the date fixed for redemption or (as the case may be) the date upon which such Note becomes due and repayable and the denominator of which is Purchases The Issuer or any Subsidiary of the Issuer may at any time purchase Notes (provided that, in the case of Definitive Bearer Notes, all unmatured Coupons and Talons appertaining thereto are purchased therewith) at any price in the open market or otherwise. Any Notes purchased may be reissued, resold or, at the option of the Issuer, surrendered to the Fiscal Agent for cancellation. The Notes so purchased, while held by or on behalf of the Issuer or any such Subsidiary, shall not entitle the holder to vote at any meetings of the Noteholders and shall not be deemed to be outstanding for the purposes of calculating quorums at meetings of the Noteholders or for the purposes of Condition

72 6.7 Cancellation All Notes which are redeemed will forthwith be cancelled (together with, in the case of Definitive Bearer Notes, all unmatured Coupons and Talons attached thereto or surrendered therewith at the time of redemption). All Notes so cancelled and any Notes purchased and surrendered for cancellation as contemplated in Condition 6.6 above (together with, in the case of Definitive Bearer Notes, all unmatured Coupons and Talons cancelled therewith) shall be forwarded to the Fiscal Agent and cannot be reissued or resold. 6.8 Late payment on Zero Coupon Notes If the amount payable in respect of any Zero Coupon Note upon redemption of such Zero Coupon Note pursuant to Condition 6.1, 6.2, 6.3 or 6.4 above or upon its becoming due and repayable as provided in Condition 9 is improperly withheld or refused, the amount due and repayable in respect of such Zero Coupon Note shall be the amount calculated as provided in Condition 6.5(c) above as though the references therein to the date fixed for the redemption or the date upon which such Zero Coupon Note becomes due and payable were replaced by references to the date which is the earlier of: (a) (b) the date on which all amounts due in respect of such Zero Coupon Note have been paid; and seven days after the date on which the full amount of the moneys payable in respect of such Zero Coupon Notes has been received by the Fiscal Agent and notice to that effect has been given to the Noteholders in accordance with Condition 13. In these Conditions: Person includes any individual, company, state owned enterprise, corporation, firm, partnership, joint venture, undertaking, association, organisation, trust, state or agency of a state or other entity (in each case whether or not being a separate legal entity); and Subsidiary means in relation to any Person (the first Person) at any particular time, any other Person whose financial statements are, in accordance with applicable law and generally accepted accounting principles, consolidated with those of the first Person. 7. TAXATION All payments of principal and interest in respect of the Notes and Coupons by or on behalf of the Issuer will be made without withholding or deduction for or on account of any present or future taxes or duties of whatever nature imposed or levied by or on behalf of any Tax Jurisdiction unless such withholding or deduction is required by law. In such event, the Issuer will pay such additional amounts as shall be necessary in order that the net amounts received by the holders of the Notes or Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would otherwise have been receivable in respect of the Notes or Coupons, as the case may be, in the absence of such withholding or deduction; except that no such additional amounts shall be payable with respect to any Note or Coupon: (a) (b) (c) presented for payment in the United Arab Emirates (including the DIFC); or the holder of which is liable for such taxes or duties in respect of such Note or Coupon by reason of his having some connection with a Tax Jurisdiction other than the mere holding of such Note or Coupon; or presented for payment more than 30 days after the Relevant Date (as defined below) except to the extent that the holder thereof would have been entitled to an additional amount on presenting the same for payment on the last day of such period of 30 days assuming that day to have been a Payment Day (as defined in Condition 5.6); or 70

73 (d) (e) (f) (g) where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to European Council Directive 2003/48/EC on the taxation of savings income (as amended) or any law implementing or complying with, or introduced in order to conform to, such Directive; or presented for payment by or on behalf of a holder who would have been able to avoid such withholding or deduction by presenting the relevant Note or Coupon to another Paying Agent in a Member State of the European Union; the holder of which would not be liable for or subject to such withholding or deduction by making a declaration of identity, non-residence or similar claim for exemption to the relevant tax authority, if. after having been requested to make such declaration or claim, such holder fails to do so within any applicable period prescribed by such relevant tax authority; or where such withholding or deduction is required pursuant to an agreement described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code, any regulations thereunder, official interpretations thereof, or any law implementing an intergovernmental approach thereto. As used herein: (i) (ii) Tax Jurisdiction means the PRC (as defined in Condition 9), the United Arab Emirates or the DIFC or, in each case, any political subdivision or any authority thereof or therein having power to tax provided that if the Issuer becomes subject at any time to any taxing jurisdiction other than the PRC, the United Arab Emirates or the DIFC, respectively, references in these Conditions to the PRC, the United Arab Emirates or the DIFC shall be construed as references to the PRC, the United Arab Emirates, the DIFC (as the case may be) and such other jurisdiction; and the Relevant Date means the date on which such payment first becomes due, except that, if the full amount of the moneys payable has not been duly received by the Fiscal Agent on or prior to such due date, it means the date on which, the full amount of such moneys having been so received, notice to that effect is duly given to the Noteholders in accordance with Condition PRESCRIPTION Claims for principal in respect of Bearer Notes shall become void unless the relevant Bearer Notes are presented for payment within ten years of the appropriate Relevant Date. Claims for interest in respect of Bearer Notes shall become void unless the relevant Coupons are presented for payment within five years of the appropriate Relevant Date. Claims for principal and interest on redemption in respect of Registered Notes shall become void unless the relevant Note certificates are surrendered for payment within ten years of the appropriate Relevant Date. There shall not be included in any Coupon sheet issued on exchange of a Talon any Coupon the claim for payment in respect of which would be void pursuant to this Condition or Condition 5.2 or any Talon which would be void pursuant to Condition EVENTS OF DEFAULT If any of the following events (each an Event of Default) occurs and is continuing, any Noteholder may give written notice to the Issuer or to the Fiscal Agent or the Registrar, as applicable, in accordance with Condition 13 that the Notes are, and they shall immediately become, due and payable at their Early Redemption Amount together with accrued interest (if any) without further formality: (a) Non-payment 71

74 The Issuer fails to pay the principal of or any interest on any of the Notes when due and such failure continues for a period of 30 days; or (b) Breach of Other Obligations The Issuer does not perform or comply with any one or more of its other obligations in the Notes or the Agency Agreement which default remains unremedied for a period of 45 days after written notice of such default shall have been delivered to the Issuer (with a copy to the Fiscal Agent or the Registrar, as applicable) by holders of an aggregate principal amount of not less than 10 per cent. of the outstanding Notes; or (c) Cross-Default (i) (ii) Any other present or future Public External Indebtedness becomes due and payable prior to its stated maturity by reason of any default, event of default or the like (howsoever described) in respect of the terms thereof, or any such Public External Indebtedness is not paid when due or, as the case may be, within any applicable grace period, provided that the aggregate amount of the relevant Public External Indebtedness in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds US$30,000,000 or its equivalent; or (d) Insolvency The Issuer or any of its Material Subsidiaries is insolvent or bankrupt or unable to pay its debts, stops or suspends payment of all or a material part of its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all or a material part of its debts, proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or a material part of the debts of the Issuer or any of its Material Subsidiaries; or (e) Winding-up An order is made or an effective resolution passed for the winding-up or dissolution or administration of the Issuer or any of its Material Subsidiaries, or the Issuer or any of its Material Subsidiaries ceases to carry on all or a material part of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by an Extraordinary Resolution of the Noteholders, or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Issuer or another of its Subsidiaries; or (f) Illegality It is or will become unlawful for the Issuer to perform or comply with any one or more of its obligations under any of the Notes, Coupons or the Agency Agreement, and the Issuer fails to obtain the necessary waiver or approval or complete such other necessary remedial action within 60 days such that the Issuer may lawfully perform such obligations; or (g) Analogous Events Any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of Conditions 9(d) to 9(f) (both inclusive). 72

75 In this Condition 9: Material Subsidiary means a Subsidiary of the Issuer whose total assets or total revenue (consolidated in the case of a Subsidiary which has Subsidiaries) as at the date at which its latest audited financial statements were prepared or, as the case may be, for the financial period to which these audited financial statements relate, account for 5 per cent. or more of the consolidated assets or consolidated revenue of the Issuer as at such date or for such period. If a Material Subsidiary transfers all of its assets and business to another Subsidiary of the Issuer, the transferee shall become a Material Subsidiary and the transferor shall cease to be a Material Subsidiary on completion of such transfer; and Public External Indebtedness means any indebtedness of the Issuer or any Subsidiary, or any guarantee or indemnity by the Issuer of indebtedness, for money borrowed which, (i) is in the form of or represented by any bond, note, debenture, debenture stock, loan stock, certificate or other instrument which is issued outside the People s Republic of China (for the purposes hereof not including the Hong Kong and Macau Special Administration Regions or Taiwan) (PRC) and is, or is capable of being listed, quoted or traded on any stock exchange or in any securities market (including, without limitation, any over-the-counter market) outside the PRC (without regard, however, to whether or not such instruments are sold through public offerings or private placements); and (ii) has an original maturity of more than 365 days. 10. REPLACEMENT OF NOTES, COUPONS AND TALONS Should any Note, Coupon or Talon be lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office of the Fiscal Agent or, as the case may be, the Registrar, upon payment by the claimant of such costs and expenses as may be incurred in connection therewith and on such terms as to evidence and indemnity as the Issuer may reasonably require. Mutilated or defaced Notes, Coupons or Talons must be surrendered before replacements will be issued. 11. AGENTS The names of the initial Paying Agents and their initial specified offices in the case of a Bearer Note and the name and initial specified office of the initial Registrar in the case of a Registered Note and the Fiscal Agent are set out below. The Issuer is entitled to vary or terminate the appointment of the Registrar or any Paying Agent and/or appoint additional or other Paying Agents, Registrar or Transfer Agents and/or approve any change in the specified office through which any Paying Agent and/or Registrar and/or Transfer Agent acts, provided that: (a) (b) (c) (d) there will at all times be a Fiscal Agent and a Registrar; so long as the Notes are listed on any stock exchange or admitted to listing by any other relevant authority, there will at all times be a Paying Agent with a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority; there will at all times be a Registrar and a Transfer Agent which, so long as Registered Notes are listed on any stock exchange or admitted to listing by any other relevant authority, will have a specified office in such place as may be required by the rules and regulations of the relevant stock exchange or other relevant authority; and there will at all times be a Paying Agent in a Member State of the European Union that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or complying with, or introduced in order to conform to, such Directive. 73

76 In addition, the Issuer shall forthwith appoint a Paying Agent having a specified office in New York City in the circumstances described in Condition 5.5. Any variation, termination, appointment or change shall only take effect (other than in the case of insolvency, when it shall be of immediate effect) after not less than 30 nor more than 45 days prior notice thereof shall have been given to the Noteholders in accordance with Condition 13. In acting under the Agency Agreement, the Agents act solely as agents of the Issuer and do not assume any obligation to, or relationship of agency or trust with, any Noteholders or Couponholders. The Agency Agreement contains provisions permitting any entity into which any Agent is merged or converted or with which it is consolidated or to which it transfers all or substantially all of its assets to become the successor paying agent. 12. EXCHANGE OF TALONS On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon (if any) forming part of such Coupon sheet may be surrendered at the specified office of the Fiscal Agent or any other Paying Agent in exchange for a further Coupon sheet including (if such further Coupon sheet does not include Coupons to (and including) the final date for the payment of interest due in respect of the Note to which it appertains) a further Talon, subject to the provisions of Condition NOTICES All notices regarding the Bearer Notes will be deemed to be validly given if published in a leading English language daily newspaper of general circulation in London or published on the website of the Irish Stock Exchange ( or if such publication is not practicable, in a leading English language daily newspaper having general circulation in Europe. The Issuer shall also ensure that notices are duly published in a manner which complies with the rules of any stock exchange or other relevant authority on which the Notes are for the time being listed or by which they have been admitted to trading. Any such notice will be deemed to have been given on the date of the first publication or, where required to be published in more than one newspaper, on the date of the first publication in all required newspapers. All notices to holders of Registered Notes will be deemed validly given if mailed by first class mail (or its equivalent) or (if posted to an overseas address) by airmail to their registered addresses appearing on the register. Any such notice shall be deemed to have been given on the third day after the day on which it was mailed. In addition, for so long as any Notes are listed on a stock exchange and the rules of that stock exchange so require, a copy of such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Until such time as any definitive Notes are issued, there may, so long as any Global Notes representing the Notes are held in their entirety on behalf of (i) Euroclear and/or Clearstream, Luxembourg, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to Euroclear and/or Clearstream, Luxembourg for communication by them to the holders of the Notes or (ii) the CMU Service, be substituted for such publication in such newspaper(s) the delivery of the relevant notice to the persons shown in a CMU Instrument Position Report issued by the CMU Service on the second business day preceding the date of despatch of such notice as holding interests in the relevant Global Note, and, in addition, in the case of both (i) and (ii) above, for so long as any Notes are listed on a stock exchange or are admitted to trading by another relevant authority, and the rules of that stock exchange or relevant authority so require, such notice will be published in a daily newspaper of general circulation in the place or places required by those rules. Any such notice shall be deemed to have been given to the holders of the Notes on the day on which the said notice was given to Euroclear and/or Clearstream, Luxembourg and/or the persons shown in the relevant CMU Instrument Position Report. Notices to be given by any Noteholder shall be in writing and given by lodging the same, together (in the case of any Note in definitive form) with the relative Note or Notes, with the Fiscal Agent (in the case of Bearer Notes) or the Registrar (in the case of Registered Notes). Whilst any of the Notes are represented by a Global Note, such notice may be given by any holder of a Note to the Fiscal Agent or the Registrar through Euroclear and/or 74

77 Clearstream, Luxembourg, and/or, in the case of Notes lodged with the CMU Service, by delivery by such holder of such notice to the CMU Lodging and Paying Agent in Hong Kong, as the case may be, in such manner as the Fiscal Agent and Euroclear and/or Clearstream, Luxembourg and/or the CMU Service, as the case may be, may approve for this purpose. 14. MEETINGS OF NOTEHOLDERS AND MODIFICATION 14.1 Meetings of Noteholders and Modification The Agency Agreement contains provisions for convening meetings of the Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution of a modification of the Notes, the Coupons or any of the provisions of the Agency Agreement. Such a meeting may be convened by the Issuer and shall be convened by the Issuer if required in writing by Noteholders holding not less than 10 per cent. in nominal amount of the Notes for the time being remaining outstanding. The quorum at any such meeting for passing an Extraordinary Resolution is one or more persons holding or representing not less than 50 per cent. in nominal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more persons being or representing Noteholders whatever the nominal amount of the Notes so held or represented, except that at any meeting the business of which includes the modification of certain provisions of the Notes or the Coupons (including modifying the date of maturity of the Notes or any date for payment of interest thereon, reducing or cancelling the amount of principal or the rate of interest payable in respect of the Notes or altering the currency of payment of the Notes or the Coupons), the quorum shall be one or more persons holding or representing not less than two-thirds in nominal amount of the Notes for the time being outstanding, or, at any adjourned such meeting, one or more persons holding or representing not less than one-quarter in nominal amount of the Notes for the time being outstanding. The Agency Agreement provides that (i) a resolution passed at a meeting duly convened and held in accordance with the Agency Agreement by a majority consisting of not less than 75 per cent. of the votes cast on such resolution or (ii) a resolution in writing signed by or on behalf of the holders of not less than 75 per cent. in nominal amount of the Notes for the time being outstanding or (iii) consent given by way of electronic consents through the relevant clearing system(s) by or on behalf of the holders of not less than 75 per cent. in nominal amount of the Notes for the time being outstanding, shall, in each case, be effective as an Extraordinary Resolution of the Noteholders. An Extraordinary Resolution passed at any meeting of the Noteholders shall be binding on all the Noteholders, whether or not they are present at any meeting and whether or not they voted on the resolution, and on all Couponholders. The Fiscal Agent, the Registrar and the Issuer may agree, without the consent of the Noteholders or Couponholders, to: (a) (b) any modification (except such modifications in respect of which an increased quorum is required as mentioned above) of the Notes, the Coupons or the Agency Agreement which is not prejudicial to the interests of the Noteholders; or any modification of the Notes, the Coupons or the Agency Agreement which is of a formal, minor or technical nature or is made to correct a manifest or proven error or to comply with mandatory provisions of the law. Any such modification shall be binding on the Noteholders and the Couponholders and any such modification shall be notified to the Noteholders in accordance with Condition 13 as soon as practicable thereafter. 15. FURTHER ISSUES The Issuer shall be at liberty from time to time without the consent of the Noteholders or the Couponholders to create and issue further notes having terms and conditions the same as the Notes or the same in all respects save for the amount and date of the first payment of interest thereon and the date from which interest starts to accrue and so that the same shall be consolidated and form a single Series with the outstanding Notes. 75

78 16. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No person shall have any right to enforce any term or condition of this Note under the Contracts (Rights of Third Parties) Act 1999, but this does not affect any right or remedy of any person which exists or is available apart from that Act. 17. CURRENCY INDEMNITY If any sum due from the Issuer in respect of the Notes or the Coupons or any order or judgment given or made in relation thereto has to be converted from the currency (the first currency) in which the same is payable under the Conditions or such order or judgment into another currency (the second currency) for the purpose of (a) making or filing a claim or proof against the Issuer, (b) obtaining an order or judgment in any court or other tribunal or (c) enforcing any order or judgment given or made in relation to the Notes, the Issuer shall indemnify each Noteholder, on the written demand of such Noteholder addressed to the Issuer and delivered to the Issuer or to the specified office of the Fiscal Agent, against any loss suffered as a result of any discrepancy between (i) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (ii) the rate or rates of exchange at which such Noteholder may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof. This indemnity constitutes a separate and independent obligation of the Issuer and shall give rise to a separate and independent cause of action. 18. GOVERNING LAW AND SUBMISSION TO JURISDICTION 18.1 Governing law The Agency Agreement, the Deed of Covenant, the Notes, the Coupons, the Talons and any non-contractual obligations arising out of or in connection with the Agency Agreement, the Deed of Covenant, the Notes, the Coupons and the Talons are governed by, and shall be construed in accordance with, English law Agreement to Arbitrate Subject to Condition 18.3, any dispute, claim, difference or controversy arising out of, relating to or having any connection with the Notes and/or the Coupons (including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of their nullity and any dispute relating to any noncontractual obligations arising out of or in connection with them) (a Dispute) shall be referred to and finally resolved by arbitration under the LCIA Arbitration Rules (the Rules), which Rules (as amended from time to time) are incorporated by reference into this Condition For these purposes: (a) (b) (c) the seat of arbitration shall be London, England; there shall be three arbitrators, each of whom shall be disinterested in the arbitration, shall have no connection with any party thereto and shall be an attorney experienced in international securities transactions. The parties to the Dispute shall each nominate one arbitrator and both arbitrators in turn shall appoint a further arbitrator who shall be the chairman of the tribunal. In cases where there are multiple claimants and/or multiple respondents, the class of claimants jointly, and the class of respondents jointly shall each nominate one arbitrator. If one party or both fails to nominate an arbitrator within the time limits specified by the Rules, such arbitrator(s) shall be appointed by the LCIA. If the party nominated arbitrators fail to nominate the third arbitrator within 15 days of the appointment of the second arbitrator, such arbitrator shall be appointed by the LCIA; and the language of the arbitration shall be English. 76

79 18.3 Option to Litigate Notwithstanding Condition 18.2 above, any Noteholder or Couponholder may, in the alternative, and at its sole discretion, by notice in writing to the Issuer: (a) (b) within 28 days of service of a Request for Arbitration (as defined in the Rules); or if no arbitration has commenced, require that a Dispute be heard by a court of law. If any Noteholder or Couponholder gives such notice, the Dispute to which such notice refers shall be determined in accordance with Condition 18.4 and, subject as provided below, any arbitration commenced under Condition 18.2 in respect of that Dispute will be terminated. Each person who gives such notice and the recipient of that notice will bear its own costs in relation to the terminated arbitration. If any notice to terminate is given after service of any Request for Arbitration in respect of any Dispute, the relevant Noteholder or Couponholder must also promptly give notice to the LCIA Court and to any Tribunal (each as defined in the Rules) already appointed in relation to the Dispute that such Dispute will be settled by the courts. Upon receipt of such notice by the LCIA Court, the arbitration and any appointment of any arbitrator in relation to such Dispute will immediately terminate. Any such arbitrator will be deemed to be functus officio. The termination is without prejudice to: (a) (b) (c) the validity of any act done or order made by that arbitrator or by the court in support of that arbitration before his appointment is terminated; such arbitrator s entitlement to be paid his proper fees and disbursements; and the date when any claim or defence was raised for the purpose of applying any limitation bar or any similar rule or provision Effect of exercise of option to litigate If a notice pursuant to Condition 18.3 is issued, the following provisions shall apply: (a) (b) (c) subject to paragraph (c) below, the courts of England shall have exclusive jurisdiction to settle any Dispute and the Issuer submits to the exclusive jurisdiction of such courts; the Issuer agrees that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that it will not argue to the contrary; and this Condition 18.4 is for the benefit of the Noteholders and the Couponholders only. As a result, and notwithstanding paragraph (a) above, any Noteholder or Couponholder may take proceedings relating to a Dispute (Proceedings) in any other courts with jurisdiction. To the extent allowed by law, any Noteholder or Couponholder may take concurrent Proceedings in any number of jurisdictions Appointment of Process Agent The Issuer appoints Industrial and Commercial Bank of China Limited, London Branch at its registered office at 81 King William Street, London, EC4N 7BG as its agent for service of process, and undertakes that, in the event of Industrial and Commercial Bank of China Limited, London Branch ceasing so to act or ceasing to be registered in England, it will appoint another person as its agent for service of process in England in respect of any Proceedings. Nothing herein shall affect the right to serve proceedings in any other manner permitted by law. 77

80 18.6 Waiver of immunity The Issuer irrevocably and unconditionally with respect to any Dispute or Proceedings to the full extent permitted by applicable law (i) waives any right to claim sovereign or other immunity from jurisdiction, recognition or enforcement and any similar argument in any jurisdiction, (ii) submits to the jurisdiction of the English courts and the courts of any other jurisdiction in relation to the recognition of any judgment or order of the English courts or the courts of any competent jurisdiction in relation to any Dispute or Proceedings and (iii) consents to the giving of any relief (whether by way of injunction, attachment, specific performance or other relief) or the issue of any related process, in any jurisdiction, whether before or after judgment, including without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment in connection with any Dispute or Proceedings. 78

81 APPLICABLE FINAL TERMS Set out below is the form of Final Terms which will be completed for each Tranche of Notes issued under the Programme. When completing the Final Terms for a Tranche of Notes in respect of which no prospectus is required to be published under the Prospectus Directive all references to the Prospectus Directive in these Final Terms must be removed. [Date] INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, ACTING THROUGH INDUSTRIAL AND COMMERCIAL BANK OF CHINA LIMITED, DUBAI (DIFC) BRANCH Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes] under the US$4,000,000,000 Euro Medium Term Note Programme PART A CONTRACTUAL TERMS Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Base Prospectus dated 3 June 2016 [and the supplementary prospectus dated [date]] which [together] constitute[s] a base prospectus for the purposes of the Prospectus Directive (the Base Prospectus). This document constitutes the Final Terms of the Notes described herein [for the purposes of Article 5.4 of the Prospectus Directive] 1 and must be read in conjunction with the Base Prospectus. Full information on the Issuer and the offer of the Notes is only available on the basis of the combination of these Final Terms and the Base Prospectus. The Base Prospectus [and these Final Terms] 2 [is/are] available for viewing [on the website of the Central Bank of Ireland ( and] 3 during normal business hours at the registered office of the Issuer at Level 5 & 6, Gate Village 01, Dubai International Financial Centre, P.O. Box , Dubai, United Arab Emirates. [Include whichever of the following apply or specify as Not Applicable. Note that the numbering should remain as set out below, even if Not Applicable is indicated for individual paragraphs or subparagraphs (in which case the sub-paragraphs of the paragraphs which are not applicable can be deleted). Italics denote directions for completing the Final Terms.] [If the Notes have a maturity of less than one year from the date of their issue, the minimum denomination [must/may need to] be 100,000 or its equivalent in any other currency.] 1. Issuer: Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch 2. (a) Series Number: [ ] (b) Tranche Number: [ ] 1 To be included only if the Notes are to be admitted to listing on the official list, and to trading on the regulated market, of the Irish Stock Exchange or other regulated market for the purposes of the Prospectus Directive. 2 To be included only if the Notes are to be admitted to listing on the official list, and to trading on the regulated market, of the Irish Stock Exchange or other regulated market for the purposes of the Prospectus Directive. 3 To be included only if the Notes are to be admitted to listing on the official list, and to trading on the regulated market, of the Irish Stock Exchange or other regulated market for the purposes of the Prospectus Directive. 79

82 (c) Date on which the Notes will be consolidated and form a single Series: The Notes will be consolidated and form a single Series with [identify earlier Tranches] on [the Issue Date/exchange of the Temporary Global Note for interests in the Permanent Global Note, as referred to in paragraph 21 below, which is expected to occur on or about [date]][not Applicable] 3. Specified Currency or Currencies: [ ] 4. Aggregate Nominal Amount: (a) Series: [ ] (b) Tranche: [ ] 5. Issue Price: [ ] per cent. of the Aggregate Nominal Amount [plus accrued interest from [insert date] (if applicable)] 6. (a) Specified Denominations: [ ] (Note: where multiple denominations above [100,000] or equivalent are being used the following sample wording should be followed: [100,000] and integral multiples of [ 1,000] in excess thereof up to and including [ 199,000]. No Notes in definitive form will be issued with a denomination above [ 199,000]. ) (N.B. If an issue of Notes is (i) NOT admitted to trading on a European Economic Area exchange; and (ii) only offered in the European Economic Area in circumstances where a prospectus is not required to be published under the Prospectus Directive the 100,000 or equivalent minimum denomination is not required.) (N.B. If an issue of Notes is NOT listed on NASDAQ Dubai, the U.S.$100,000 minimum denomination is not required.) (In the case of Registered Notes, this means the minimum integral amount in which transfers can be made.) (b) Calculation Amount: [ ] (If only one Specified Denomination, insert the Specified Denomination. 7. (a) Issue Date: [ ] If more than one Specified Denomination, insert the highest common factor. Note: There must be a common factor in the case of two or more Specified Denominations.) (b) Interest Commencement Date: [specify/issue Date/Not Applicable] (N.B. An Interest Commencement Date will not be relevant for 80

83 certain Notes, for example Zero Coupon Notes.) 8. Maturity Date: [Specify date or for Floating rate notes Interest Payment Date falling in or nearest to [specify month and year]] 4 9. Interest Basis: [[ ] per cent. Fixed Rate] [[EURIBOR / LIBID / LIBOR / LIMEAN / SHIBOR / HIBOR / SIBOR / KLIBOR / EIBOR / SAIBOR / BBSW / AUD LIBOR / JPY LIBOR / PRIBOR / CNH HIBOR / TRLIBOR or TRYLIBOR / TIBOR] +/- [ ] per cent. Floating Rate] [Zero Coupon] (see paragraph [17]/[18]/[19] below) 10. Redemption[/Payment] Basis: Subject to any purchase and cancellation or early redemption, the Notes will be redeemed on the Maturity Date at [ ] per cent. of their nominal amount 11. Change of Interest Basis or Redemption/Payment Basis: [Specify the date when any fixed to floating rate change occurs or cross refer to paragraphs 14 and 15 below and identify there][not Applicable] 12. Put/Call Options: [Investor Put] [Issuer Call] [Not Applicable] [(see paragraph [17]/[18] below)] 13. (a) Status of the Notes: Senior (b) Date [Board] approval for issuance of Notes obtained: [ ] (N.B. Only relevant where Board (or similar) authorisation is required for the particular Tranche of Notes) PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE 14. Fixed Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Rate(s) of Interest: [ ] per cent. per annum payable in arrear on each Interest Payment Date (b) Interest Payment Date(s): [[ ] in each year up to and including the Maturity Date] 5 4 Note that for Renminbi denominated Fixed Rate Notes where the Interest Payment Dates are subject to modification it will be necessary to use the second option here. 5 Note that for certain Renminbi denominated Fixed Rate Notes the Interest Payment Dates are subject to modification and the following words should be added: provided that if any Interest Payment Date falls on a day which is not a Business Day, the Interest Payment Date shall be postponed to the next day which is a Business Day unless it would thereby fall into the next calendar month, in which event such Interest Payment Date shall be brought forward to the immediately preceding Business Day. For these purposes, Business Day means a day on which commercial banks and foreign exchange markets settle payments [in Renminbi] and are open for 81

84 (N.B. This will need to be amended in the case of long or short coupons) (c) Fixed Coupon Amount(s): [ ] per Calculation Amount 6 (Applicable to Notes in definitive form.) (d) Broken Amount(s): (Applicable to Notes in definitive form.) [ ] per Calculation Amount, payable on the Interest Payment Date falling [in/on] [ ] [Not Applicable] (e) Day Count Fraction: [30/360 or Actual/Actual (ICMA) or Actual/365 (Fixed)] (f) Determination Date(s): [[ ] in each year] [Not Applicable] (Insert regular interest payment dates, ignoring issue date or maturity date in the case of a long or short first or last coupon N.B. Only relevant where Day Count Fraction is Actual/Actual (ICMA)) 15. Floating Rate Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Specified Period(s)/Specified Interest Payment Dates: [ ] [, subject to adjustment in accordance with the Business Day Convention set out in (b) below /, not subject to adjustment, as the Business Day Convention in (b) below is specified to be Not Applicable] (b) Business Day Convention: [Floating Rate Convention/Following Business Day Convention/ Modified Following Business Day Convention/ Preceding Business Day Convention][Not Applicable] (c) Additional Business Centre(s): [ ] (d) Manner in which the Rate of Interest and Interest Amount is to be determined: [Screen Rate Determination/ISDA Determination] (e) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Fiscal Agent): [ ] (f) Screen Rate Determination: Reference Rate: [ ] month [EURIBOR, LIBID, LIBOR, LIMEAN, SHIBOR, general business (including dealing in foreign exchange and foreign currency deposits) in [Hong Kong][London] and [ ]. 6 For Renminbi denominated Fixed Rate Notes where the Interest Payment Dates are subject to modification the following wording may be appropriate: Each Fixed Coupon Amount shall be calculated by applying the Rate of Interest to each Calculation Amount, multiplying such sum by the actual number of days in the Interest Period divided by 365 and rounding the resultant figure to the nearest [CNY]0.01, [CNY]0.005 being rounded upwards. 82

85 Interest Determination Date(s): HIBOR, SIBOR, KLIBOR, EIBOR, SAIBOR, BBSW, AUD LIBOR, JPY LIBOR, PRIBOR, CNH HIBOR, TRLIBOR or TRYLIBOR, TIBOR] [ ] (Second London business day prior to the start of each Interest Period if LIBOR (other than Sterling or euro LIBOR), first day of each Interest Period if Sterling LIBOR and the second day on which the TARGET2 System is open prior to the start of each Interest Period if EURIBOR or euro LIBOR or the second Hong Kong business day prior to the start of each Interest Period if CNH HIBOR) Relevant Screen Page: [ ] (In the case of EURIBOR, if not Reuters EURIBOR01 ensure it is a page which shows a composite rate or amend the fallback provisions appropriately) Relevant Time: [ ] Relevant Financial Centre: [ ] (g) ISDA Determination: Floating Rate Option: [ ] Designated Maturity: [ ] Reset Date: [ ] (In the case of a LIBOR, EURIBOR or CNH HIBOR based option, the first day of the Interest Period) (h) Margin(s): [+/-] [ ] per cent. per annum (i) Minimum Rate of Interest: [ ] per cent. per annum (j) Maximum Rate of Interest: [ ] per cent. per annum (k) Day Count Fraction: [Actual/Actual (ISDA)][Actual/Actual] Actual/365 (Fixed) Actual/365 (Sterling) Actual/360 [30/360][360/360][Bond Basis] [30E/360][Eurobond Basis] 30E/360 (ISDA)] 16. Zero Coupon Note Provisions [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Accrual Yield: [ ] per cent. per annum 83

86 (b) Reference Price: [ ] (c) Day Count Fraction in relation to Early Redemption Amounts and late payment: [30/360] [Actual/360] [Actual/365] PROVISIONS RELATING TO REDEMPTION 17. Issuer Call: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount: [[ ] per Calculation Amount] (c) If redeemable in part: (i) (ii) Minimum Redemption Amount: Maximum Redemption Amount: [ ] per Calculation Amount [ ] per Calculation Amount 18. Investor Put: [Applicable/Not Applicable] (If not applicable, delete the remaining subparagraphs of this paragraph) (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount: [[ ] per Calculation Amount] 19. Final Redemption Amount: [[ ] per Calculation Amount] 20. Early Redemption Amount payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required): [[ ] per Calculation Amount] (N.B. If the Final Redemption Amount is 100 per cent. of the nominal value (i.e. par), the Early Redemption Amount is likely to be par (but consider). If, however, the Final Redemption Amount is other than 100 per cent. of the nominal value, consideration should be given as to what the Early Redemption Amount should be.) GENERAL PROVISIONS APPLICABLE TO THE NOTES 21. Form of Notes: [Bearer Notes: [Temporary Global Note exchangeable for a Permanent Global Note which is exchangeable for Definitive Notes [on 60 days notice given at any time/only upon an Exchange Event]] [Temporary Global Note exchangeable for Definitive Notes on and after the Exchange Date] [Permanent Global Note exchangeable for Definitive Notes [on 84

87 60 days notice given at any time/only upon an Exchange Event/ at any time at the request of the Issuer]]] [Registered Notes: [Registered Global Note (US$[ ] nominal amount) registered in the name of [a nominee for a common depositary for Euroclear and Clearstream, Luxembourg]] [(N.B. The exchange upon notice/at any time at the request of the Issuer options should not be expressed to be applicable if the Specified Denomination of the Notes in paragraph 6 includes language substantially to the following effect: [ 100,000] and integral multiples of 1,000 in excess thereof up to and including [ 199,000]). Furthermore, such Specified Denomination construction is not permitted in relation to any issue of Notes which is to be represented on issue by a Temporary Global Note exchangeable for Definitive Notes.) ]] 22. Additional Financial Centre(s): [Not Applicable/give details] (Note that this paragraph relates to the date of payment and not the end dates of Interest Periods for the purposes of calculating the amount of interest to which subparagraph 15(c) relates) 23. Offshore Renminbi Centre(s): [Hong Kong [/and] London [/and] Taiwan/other relevant jurisdiction where clearing bank agreements have been established][and a reference to the Offshore Renminbi Centre shall mean[, other than for the purpose of Condition 5.6(b) of the Notes,] a reference to [any] of them] (Note that this paragraph relates to Conditions 5.1(a), 5.4 and 5.6(b) of the Notes and consideration should be given as to whether the relevant clearing system and the clearing bank agreements have appropriate mechanisms/procedures in place to deal with payments in the relevant offshore Renminbi centres) 24. Talons for future Coupons to be attached to Definitive Notes in bearer form (and dates on which such Talons mature): [Yes, as the Notes have more than 27 coupon payments, Talons may be required if, on exchange into definitive form, more than 27 coupon payments are still to be made/no] (Note To be completed for an issuance of bearer Notes only. Not applicable for a registered issue of Notes) THIRD PARTY INFORMATION [[Relevant third party information] has been extracted from [specify source]. The Issuer confirms that such information has been accurately reproduced and that, so far as it is aware and is able to ascertain from information published by [specify source], no facts have been omitted which would render the reproduced information inaccurate or misleading.][not Applicable] Signed on behalf of Industrial and Commercial Bank of China Limited, acting through Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch 85

88 By: duly authorised 86

89 PART B OTHER INFORMATION 1. LISTING AND ADMISSION TO TRADING (a) Listing and Admission to trading [Application has been made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [the Irish Stock Exchange's Main Securities Market and NASDAQ Dubai and, if relevant, listing on [the Official List of the Irish Stock Exchange / the Official List maintained by the Dubai Financial Services Authority)] with effect from [ ].] [Application is expected to be made by the Issuer (or on its behalf) for the Notes to be admitted to trading on [the Irish Stock Exchange's Main Securities Market and NASDAQ Dubai and, if relevant, listing on [the Official List of the Irish Stock Exchange and the Official List maintained by the Dubai Financial Services Authority)] with effect from [ ].] (where documenting a fungible issue indicate that original notes are already admitted to trading) (b) Estimate of total expenses related to admission to trading: [ ] 2. RATINGS Ratings: [The Notes to be issued [[have been]/[are expected to be]] rated]/[the following ratings reflect ratings assigned to Notes of this type issued under the Programme generally]: [insert details]] by [insert the legal name of the relevant credit rating agency entity(ies) and associated defined terms]. [Each of [insert if a credit rating agency other than Moody s or S&P][insert Credit Rating Agency] is established in the European Union and is registered under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation)] [[Insert if a credit rating agency other than Moody s or S&P][insert Credit Rating Agency] is not established in the European Union and has not applied for registration under Regulation (EC) No. 1060/2009 (as amended) (the CRA Regulation). The rating of [insert if a credit rating agency other than Moody s or S&P][insert Credit Rating Agency] has been endorsed by [insert legal name of relevant EU-registered CRA entity] in accordance 87

90 with the CRA Regulation. [Insert legal name of relevant EU-registered CRA entity] is established in the European Union and registered under the CRA Regulation. As such [insert legal name of relevant EUregistered CRA entity] is included in the list of credit rating agencies published by the European Securities and Markets Authority on its website in accordance with the CRA Regulation. The European Securities and Markets Authority has indicated that ratings issued in [jurisdiction of non-eu CRA entity] which have been endorsed by [insert legal name of relevant EUregistered CRA entity] may be used in the EU by the relevant market participants.] (The above disclosure should reflect the rating allocated to Notes of the type being issued under the Programme generally or, where the issue has been specifically rated, that rating.) 3. INTERESTS OF NATURAL AND LEGAL PERSONS INVOLVED IN THE ISSUE [Save for any fees payable to the [Managers/Dealers], so far as the Issuer is aware, no person involved in the issue of the Notes has an interest material to the offer. The [Managers/Dealers] and their affiliates have engaged, and may in the future engage, in investment banking and/or commercial banking transactions with, and may perform other services for, the Issuer and its affiliates in the ordinary course of business - Amend as appropriate if there are other interests] [(When adding any other description, consideration should be given as to whether such matters described constitute "significant new factors" and consequently trigger the need for a supplement to the Base Prospectus under Article 16 of the Prospectus Directive.)] 4. YIELD (Fixed Rate Notes only) Indication of yield: [ ] 5. HISTORIC INTEREST RATES (Floating Rate Notes only) The yield is calculated at the Issue Date on the basis of the Issue Price. It is not an indication of future yield. Details of historic [EURIBOR / LIBID / LIBOR / LIMEAN / SHIBOR / HIBOR / SIBOR / KLIBOR / EIBOR / SAIBOR / BBSW / AUD LIBOR / JPY LIBOR / PRIBOR / CNH HIBOR / TRLIBOR or TRYLIBOR / TIBOR] rates can be obtained from [Reuters]. 6. OPERATIONAL INFORMATION (a) ISIN: [ ] (b) Common Code: [ ] (c) CMU Instrument Number: [ ][Not Applicable] 88

91 (d) Any clearing system(s) other than Euroclear and Clearstream, Luxembourg and the relevant identification number(s): [CMU/Not Applicable/give name(s) and number(s)] (e) Delivery: Delivery [against/free of] payment (f) Names and addresses of additional Paying Agent(s) (if any): [ ] 7. DISTRIBUTION (a) Method of distribution: [Syndicated/Non-syndicated] (b) If syndicated, names of Managers: [Not Applicable/give names] (c) Date of [Subscription] Agreement: [ ] (d) Stabilisation Manager(s) (if any): [Not Applicable/give name] (e) If non-syndicated, name of relevant Dealer: [Not Applicable/give name] (f) U.S. Selling Restrictions: [Regulation S Category 2][TEFRA D/TEFRA C/TEFRA not applicable] 89

92 Capitalisation and Indebtedness of the Bank CAPITALISATION AND INDEBTEDNESS The following table sets forth the Bank s consolidated capitalisation as at 31 December 2015 as derived from the audited consolidated financial statements of the Group for the year ended 31 December Please read this table in conjunction with the audited consolidated financial statements of the Group for the year ended 31 December 2015 and the accompanying notes incorporated by reference in this Base Prospectus. As at 31 December 2015 Debt: (1) Debt securities issued (2) : (RMB in millions) Subordinated bonds and Tier 2 Capital Notes ,553 Other debt securities issued ,069 Total debt securities issued 306,622 Equity: Equity attributable to equity holders of the Bank Share capital ,407 Other equity instrument... 79,375 Reserves ,704 Retained profits ,988 Non-controlling interests... 11,045 Total equity... 1,800,519 Total capitalisation (3)... 2,107,141 Notes: (1) As at 31 December 2015, we had deposits from customers, amounts due to banks and other financial institutions, certificates of deposits issued, balances under repurchase agreements, credit commitments, acceptance, issued letters of guarantee and letters of credit, other commitments and contingencies, including outstanding litigation, that arise from its ordinary course of business. (2) Since 31 December 2015, we issued additional debt securities in the ordinary course of business, which included but was not limited to (a) on 11 January 2016, the Bank s Luxembourg branch issued U.S.$500,000,000 floating rate notes due 2019; (b) on 10 May 2016, the Bank s Singapore branch issued U.S.$800,000, per cent. notes due 2019; (c) on 23 May 2016, the Bank s Hong Kong Branch issued U.S.$500,000, per cent. notes due 2019 (d) on 26 May 2016, the Bank s New York Branch issued U.S.$600,000, per cent. notes due See Recent Developments Recent Programme Establishments and Issuances. (3) Total capitalisation equals total debt securities issued plus total equity. Unless otherwise disclosed in this Base Prospectus, there has not been any material change in the Bank s capitalisation and indebtedness since 31 December

93 DESCRIPTION OF THE ISSUER The Bank operates principally in Mainland China, and also has branches and subsidiaries operating outside Mainland China (including: Hong Kong, Macau, Singapore, Frankfurt, Luxembourg, Seoul, Tokyo, London, Almaty, Jakarta, Moscow, Doha, Dubai, Abu Dhabi, Sydney, Toronto, Kuala Lumpur, Hanoi, Bangkok, New York, Karachi, Mumbai, Phnom Penh, Vientiane, Lima, Buenos Aires, Sao Paulo and Auckland). The Issuer is a branch of the Bank in the Dubai International Financial Centre (the DIFC), a financial free-zone in Dubai, United Arab Emirates. For further details on the principal subsidiaries of the Bank, please refer to the sections Description of the Bank Controlled Subsidiaries and Major Equity Participating Company. The Bank commenced operations in the DIFC in 2008, initially through its subsidiary Industrial and Commercial Bank of China (Middle East) Limited, a limited liability company incorporated in the DIFC. Industrial and Commercial Bank of China (Middle East) Limited was registered with the Dubai Financial Services Authority (the DFSA) as an Authorised Firm for the purposes of article 42(1)(a) of DIFC Law No. 1 of 2004, as amended (the DIFC Regulatory Law) from 28 April 2008 until 22 July In 2013, Industrial and Commercial Bank of China (Middle East) Limited s operations were transferred to Industrial and Commercial Bank of China Limited, Dubai (DIFC) Branch (the Dubai (DIFC) Branch) which obtained its license from the DIFC on 13 November 2013 and obtained its licence from the DFSA on 20 November The registered office of the Dubai (DIFC) Branch is at Level 5 & 6, Gate Village 01, Dubai International Financial Centre, P.O. Box , Dubai, United Arab Emirates, its registration number is 1481 and its telephone number is The Dubai (DIFC) Branch is authorised and regulated by the China Banking Regulatory Commission and is authorised and regulated in the DIFC by the DFSA as an Authorised Firm in accordance with article 42(1)(a) of the DIFC Regulatory Law. The Dubai (DIFC) Branch appears on the list of the entities authorised and supervised by the DFSA which is available on the DFSA s website: The Dubai (DIFC) Branch uses the Group s advantages and regional resources to provide comprehensive financial services for Chinese companies in the Middle East while attracting target customers on the local market. Regulated Activities and Services In the DIFC, the Dubai (DIFC) Branch is authorised by the DFSA to carry out the following regulated activities and services: (i) accepting deposits; (ii) advising on financial products or credit; (iii) arranging credit or deals in investments; (iv) arranging custody; (v) dealing in investments as agent; (vi) dealing in investments as principal; (vii) managing assets; and (viii) providing credit. Dubai Financial Services Authority The DFSA was established under Articles 3 and 7 of Dubai Law No. 9 of 2004 and is the independent body responsible for supervising and regulating all financial and professional services conducted in or from the DIFC as well as licensing, authorising and registering institutions and individuals to conduct those services. The DFSA s regulatory mandate covers asset management, banking and credit services, securities, collective investment funds, custody and trust services, commodities futures trading, Islamic finance, insurance, an international equities exchange and an international commodities derivatives exchange. In discharging its regulatory mandate, the DFSA has a statutory obligation to pursue the following objectives: to foster and maintain fairness, transparency and efficiency in the financial services industry (namely, the financial services and related activities carried on) in the DIFC; 91

94 to foster and maintain confidence in the financial services industry in the DIFC; to foster and maintain the financial stability of the financial services industry in the DIFC, including the reduction of systemic risk; to prevent, detect and restrain conduct that causes or may cause damage to the reputation of the DIFC or the financial services industry in the DIFC, through appropriate means including the imposition of sanctions; to protect direct and indirect users and prospective users of the financial services industry in the DIFC; to promote public understanding of the regulation of the financial services industry in the DIFC; and to pursue any other objectives as the Ruler of Dubai may, from time-to-time, set under DIFC Law. The DFSA is an Associate Member of the International Organisation of Securities Commissions (IOSCO). 92

95 DESCRIPTION OF THE BANK OVERVIEW We rank first in the PRC banking industry in terms of each of total assets, market share of loans and market share of deposits. In 2015, we were named the world s largest company by Forbes based on a composite score from equallyweighted measures of revenue, profits, assets and market value and the largest bank in terms of tier 1 capital and total assets by The Banker and ranked first place in terms of revenue by Fortune for the third year in a row. Established on 1 January 1984, we were restructured to become a joint-stock limited company on 28 October On 27 October 2006, we were successfully listed on both the Shanghai Stock Exchange and Hong Kong Stock Exchange. The Bank is the largest listed bank in the world, possessing a wide customer base, a diversified business structure, strong innovation capabilities and market competitiveness. We have an established presence in six continents, with a global network covering 42 countries and regions as at 31 December In addition, through our equity participation in Standard Bank Group Limited, we indirectly cover 20 countries in Africa. We provide comprehensive financial products and services to over five million corporate customers and 496 million personal customers via our distribution channels consisting of 17,094 domestic institutions, 404 overseas institutions and 1,611 overseas correspondent banks in 147 countries as at 31 December 2015, as well as through our E-banking network comprising a range of Internet and telephone banking services and self-service banking centres, forming a diversified and internationalised operating structure focusing on commercial banking business and maintaining a leading position in the domestic market in the commercial banking sector. We provide customers with a wide range of financial products and services and have formed a cross-market, internationalised and integrated business model with a focus on commercial banking. We have maintained a leading position among PRC commercial banks in most of our core and emerging businesses. We believe that Industrial and Commercial Bank of China is one of the most recognised financial service brand names in the PRC with significant international influence. We have won numerous awards over the years, including, among others: the Best Emerging Markets Bank by UK s Euromoney in 2015, becoming the first Asian financial institution to win this global award; the Most International Asian Cash Management Bank in Asia Pacific and the Best Counterparty Bank in China in 2015 by The Asian Banker; the Best Treasury & Cash Management Bank in China in 2015 by Global Finance; the Best Bank in China for Payments and Collections in 2015 by Treasury Management International; and the Global Bank of the Year, Bank of the Year in Asia-Pacific and Bank of the Year in China in 2014 by The Banker; the Best China Brand in 2014 by Interbrand; the Best Domestic Bank (China) and Platinum Award for All-Round Excellence in 2014 by The Asset; the Best of the Best Domestic Bank in China and Best Domestic Bank in China in 2014 by Asiamoney; and 93

96 the Best Bank in China in 2014 by Finance Asia. We strive to duly implement the organic unification of economic and social responsibilities, gaining wide social recognition for supporting economic and social development, protecting environment and resources, and participating in community services. In recent years, we have won awards from various institutions including Best Social Responsibility Financial Institution Award by China Banking Association and Best Social Responsibility Award by JRJ.com. For the years ended 31 December 2014 and 2015, we achieved profit for the period of RMB276,286 million and RMB277,720 million, respectively. As at 31 December 2014 and 2015, we had total assets of RMB20,609,953 million and RMB22,209,780 million, respectively, and our net loans and advances to customers totalled RMB10,768,750 million and RMB11,652,812 million, respectively. OUR COMPETITIVE STRENGTHS We possess a leading market position in the PRC with growing international influence. We have set our vision to become a global leading bank with the best profitability, performance and prestige. We believe that Industrial and Commercial Bank of China has become one of the PRC s best known brand names in the financial services industry, and our international influence is also expanding rapidly. We rank first in the PRC banking industry in terms of each of total assets, market share of loans and market share of deposits, and we benefit from the scale of our operations. Based on statistics of the PBOC, as at 31 December 2015, we ranked first in the PRC banking industry in terms of each of corporate deposits and corporate loans. We also ranked first in the PRC banking industry in terms of the size of personal loans. As at 31 December 2015, we had RMB22,209,780 million in total assets. We are one of the highest-rated domestic Chinese commercial banks in terms of credit ratings by Moody s and Standard & Poor s. Currently, we have a rating of A with a stable outlook by Standard & Poor s and a rating of A1 with a negative outlook by Moody s. With respect to our traditional banking business, we have further strengthened our competitive advantages and leading position, and our corporate loans and deposits and individual loans and deposits businesses have been growing steadily in recent years. With respect to our emerging businesses and intermediary businesses, we have maintained a high level of growth and development in these areas and further expanded our competitive advantages. As at 31 December 2015, we ranked first in the industry in terms of the size of assets under custody, total number of credit cards issued, the consumption value through our credit cards and the amount of outstanding overdraft balances. As at the same date, we also led the industry in terms of our intermediary businesses volume and pace of growth. Leveraging on the growth of the PRC economy, we have enhanced our global influence. In recent years, with our strong corporate culture, management capability and operating performance, we have received numerous industry awards from various well-known international media publications and other institutions. We have transformed our business operations successfully and have created a leading business model in the PRC banking industry. We have transformed our business and optimised our business structure to create a business model that we believe balances risks and benefits and has strong sustainability. We have optimised our asset and liability structure. With respect to assets, we have improved our returns on loans, while maintaining a low proportion of high-risk assets. As at 31 December 2015, our risk-weighted assets to total assets ratio was 59.51% and our loan-to-deposit ratio was 71.4%. At the same time, in view of the state of the PRC economy and guidance from state macro-control policy, we have maintained reasonable and balanced growth of our total amount of credit, and on this basis, we have shifted the focus of our work to the adjustment and optimisation of our credit structure and the cultivation of new growth areas. We have optimised our corporate loan product mix in terms of industry allocation, customer allocation and 94

97 geographical allocation. High quality businesses with strong growth potential, such as personal loans, loans to SMEs and trade finance, have been increasing, which has promoted the development of our large, medium and small customer base and the development of both traditional and emerging markets. With respect to liabilities, through the sale of wealth management products, we re-directed high-cost term deposits and generated income from transaction fees. Meanwhile, we optimised the liabilities structure and effectively controlled the cost of capital. We have continued to optimise our income structure. We significantly enhanced our efforts to develop low capital consumption intermediary businesses and emerging businesses. In addition, we have pushed forward the diversification of our businesses and promoted a more diversified, stable and balanced income structure. We believe our intermediary businesses lead our peers in terms of both volume and pace of growth. For the year ended 31 December 2014, our fee and commission income was RMB146.7 billion. For the year ended 31 December 2015, our fee and commission income was RMB161.7 billion, representing an increase of 10.2% over the year ended 31 December We have established an extensive customer base and effective distribution channels, and achieved a leading position in electronic banking services. We have an extensive customer base. As at 31 December 2015, we had approximately over five million corporate banking customers and over 496 million individual customers. We have an industry-leading corporate customer base, and the number of high quality corporate banking customers has been increasing. Our optimised customer structure has not only provided us with steady sources of funds and promoted sound growth of our corporate credit business, but also has laid a solid foundation for the fast growth of our corporate intermediary business. The proportion of our customer base represented by medium and high-end individual customers has increased rapidly in recent periods. Our high-end individual customer base provides strong support for the further development of our personal financial products and services. We have established a well-structured, extensive and efficient distribution network. As at 31 December 2015, we had 17,094 domestic institutions and 404 overseas institutions in 42 countries and regions and indirectly covered 20 African countries through our equity participation in Standard Bank Group Limited. We have also established correspondent relationships with 1,809 overseas banks in 147 countries and regions, with a service network covering Asia, Africa, Latin America, Europe, North America and Australia, including major international financial centres. We have strengthened our network by adjusting the geographical allocation of our branch network and upgrading outlets. We have further diversified our distribution channels in order to enhance our ability to provide individualised services. We have continued to upgrade our operational network, to strengthen the build-up of our customer management team and improve our multi-level customer service system and our customer service capabilities. We have a leading position in the PRC banking industry in terms of E-banking capability. We have actively promoted our electronic banking platform, E-banking, as a substitute for traditional physical outlets. As at 31 December 2015, we had 29,043 self-service banking centres and 99,789 ATMs. For the year ended 31 December 2015, ATM transaction volume reached RMB12,666.8 million, up 16.7 per cent. compared with 31 December Through our customer and market-oriented services, we have consolidated our leading position in E-banking, accelerated the development of new fields, markets and customers, as well as the expansion of overseas businesses. To ensure balanced and rapid development of the scale, quality and efficiency of our E-banking business, we have further strengthened our risk prevention and control capabilities. We promote our ICBC Mobile Banking brand, and also focus on expanding our business in markets such as mobile banking and e-commerce to increase our brand awareness, thereby further enhancing our market competitiveness. The increase in our E-banking trading volume and business volume to total volume ratios has continuously accelerated. For the year ended 31 December 2015, the E-banking trading volume exceeded RMB592 95

98 trillion, and business volume handled via our E-banking channel accounted for 30 per cent. of total volume. As at 31 December 2015, we attracted over 190 million mobile banking customers. We believe we have a leading position in the industry in terms of our E-banking capability. In recent years, we have received numerous awards such as the Best Corporate/Institutional Internet Bank in China and Best Mobile Banking App in Asia-Pacific by Global Finance, Best Internet Banking Product in China by The Asian Banker, Excellent E-banking by Wisemoney, Gold E-banking of the Year by Financial Money, Best E-banking of the Year by finance.sina.com.cn, as well as Excellent Internet Banking Brand of the Year, Excellent Mobile Banking Brand of the Year and Best Financial Services Website by Hexun. We have further enhanced our risk control capability by establishing an advanced, quantitative and comprehensive risk management system. We have improved our risk management capabilities, implemented our Full Process and Full Coverage risk management model and adopted New Standards and New Technology, which are described in more detail below. Full Process Our risk management system covers the complete process of risk identification and quantification, control, monitoring, assessment and reporting, constituting a developed comprehensive risk management organisational structure and system. Full Coverage Our risk management system comprehensively covers all of our domestic and overseas branches, subsidiaries and businesses and has been able to identify, measure, monitor and assess our overall risks. We have established a management system for our consolidated entities and have enhanced our internal transaction management as well as the risk management evaluation for our overseas branches. Our internal rating-based approach has been applied to the whole risk management process from marketing, rating, pricing, approval and authorisation to quality categorisation. We have further expanded the coverage of our industry credit policy and risk limit management and enhanced our credit policy management system. New Standards In line with the CBRC s guidance for the implementation of the new capital regulatory standards, we have strengthened our enterprise risk management systems, improved credit risk management and accelerated market risk management. We believe we maintain a leading level in operational risk management among our peers in the PRC and have implemented prudent liquidity risk management. In 2012, the CBRC inspected and accepted the implementation of our advanced capital management methods, and our Board reviewed and approved the Compliance & Implementation Planning for Three Pillars of the Administrative Measures pursuant to the Capital Management Rules (Pillar 3). By the end of 2012, we had met the requirements under the Administrative Measures for the Capital of Commercial Banks of the PRC (Provisional) in information disclosure under Pillar 3. In April 2014, the CBRC approved the implementation of advanced capital management in six PRC banks including us. The implementation of advanced capital management will promote the adjustment of the asset portfolios of commercial banks in the PRC, enhance capital efficiency and improve capital management capabilities. New Technology We have built what we believe to be a leading risk management information system in the PRC, which is centralised, refined, streamlined and quantitative and features rigorous controls. We believe that this system conforms to the needs of the expansion of our overseas business and credit management process and reflects the latest measurement technology. We have also established a twodimensional rating system consisting of customer rating and loan rating. We are able to scientifically measure the probability of default and loss-given-default and apply such probability to our risk control and provisioning process. We can calculate the rate of return based on the risk adjustment through the customer rating and the risk-adjusted return on capital system, which provides an important basis for our decision- 96

99 making on lending. We adopted our internal model approach (IMA) to market risk, developed a global market risk management system through extension of its coverage to overseas institutions and optimised the function of our risk management systems. Our industry-leading risk management capability has helped us to maintain a low NPL ratio in terms of newly issued loans. Our NPL ratio as of 31 December 2015 was 1.50 per cent. Our advanced information technology systems provide strong support for our business innovation and development. We believe that we have in place one of the most advanced information technology systems among all commercial banks in the PRC. Since our initial public offering, we have focused on implementing our technology driven development strategy. Our advanced information technology systems have enabled us to maintain a competitive position in various fields such as customer service, product innovation, risk management, operation process reengineering and electronic banking network expansion. We have maintained the security and stability of our information technology systems despite a significant increase in our business volumes. We were the first among the five major PRC commercial banks (Industrial and Commercial Bank of China Limited, China Construction Bank Corporation, Bank of China Limited, Agricultural Bank of China Limited and Bank of Communication Co., Ltd (collectively referred to as the Major PRC Commercial Banks)) to achieve data centralisation, and we were the first large-scale commercial bank in the PRC to adopt a centralised full-function banking system that enables real-time processing of bank-wide data. We have continued to strengthen our information security and protection, improved our disaster recovery systems. The establishment of two key data centres (one primary and one backup) in Beijing and Shanghai in 2002 made us the first among PRC banks to complete the data centralisation. Also, we have set up a local data centre in Shanghai in June this year, enabling a full switchover between data centres within minutes. We have significant capacity internally for continued research and development of our global banking systems and have researched and developed our fourth generation core information system on our own initiatives. We have increased our technological support for our overseas institutions and completed the establishment of systems relating to RMB clearing at our Singapore Branch. We have extended our integrated business processing system (FOVA) to cover certain of our overseas institutions. We have also promoted the internet banking and mobile banking systems of our wholly owned Hong Kong subsidiary, Industrial and Commercial Bank of China (Asia) Limited (ICBC (Asia)), and have extended our internet banking coverage to our overseas institutions. We have established a centralised technology organisation system, formed information technology management and information technology approval committees and formulated complete and sound information technology management systems, technical standards and norms in the PRC banking industry. We have one of the largest and strongest technology teams in the PRC banking industry. In 2015, we obtained 47 new patents from the State Intellectual Property Office, and as at 31 December 2015 we held 404 patents. We have steadily implemented our internationalisation and integration strategy for development and enhanced our capability as a comprehensive financial services provider. Since our initial public offering, we have seized development opportunities domestically and overseas and steadily implemented our internationalisation and integration strategies, thereby enhancing our capability in cross-region, cross-market and cross-product services. We have accelerated the establishment of our global operation network and enhanced our international service capability by carrying out the following initiatives: with a particular emphasis on Asian and other emerging markets, we have focused on growing our businesses in both emerging and developed markets, have expanded our overseas operation network through both organic growth and strategic mergers and acquisitions and have set up both physical outlets and electronic channels; 97

100 leveraging our overseas integrated business license as well as the strong product support from FOVA for overseas institutions, we have built up our important global product lines, including retail, funds clearing, trade finance, global cash management, specialty financing, investment banking, bank card, internet banking and asset management, while managing our core businesses including loans, deposits and foreign exchange services; and following closely the trend of Chinese enterprises expanding their businesses globally, we have promoted the RMB settlement business for cross-border trades and strengthened our integrated ability to serve global customers. We have established a global network with 404 overseas institutions in 42 countries and regions as at 31 December On that basis, we have gradually shifted the focus of our internationalisation strategy to the localised, mainstream and differentiated development of overseas institutions. Through strengthening the extension of key product lines abroad and interactions between domestic and overseas operations, we have improved the competitiveness, operation and development of our overseas institutions. In addition, we entered into a series of transactions in recent years to acquire equity interests in overseas banks and financial institutions in order to further strengthen our global network. Our acquisition of a 60.0% stake in Standard Bank was formally completed on 1 February We purchased 75.5% of the existing issued shares in Tekstil Bankasi A.S. (Tekstilbank) on 22 May In July 2015, the Capital Markets Board of Turkey approved our application for approval of making a tender offer for the remaining shares of Tekstilbank held by public shareholders. After the tender offer, we held 92.82% of the issued shares of Tekstilbank.. For further details about our international operations, see International Operations and Diversified Operations. Our overseas branches in Singapore, Luxembourg, Qatar, Canada, and Thailand have obtained the qualification to become RMB clearing banks, making us the first PRC financial institution with branches with RMB clearing capability in Asia, Europe, and the Americas and establishing a truly global RMB clearing system operating 24 hours a day and a solid foundation for further promoting cross-border RMB transactions. In 2015, our cross-border RMB business volume increased by 20.6% over the previous year and reached RMB4.41 trillion, with a clearing system covering 75 overseas countries and regions. Such increase in our RMB clearing capability has facilitated cross-border RMB transactions and promoted the internationalisation of RMB. In addition, leveraging our advantages in customer relations, capital management and information technology systems, we have proactively set up and accelerated the development of licensed non-banking financial businesses such as investment banking, fund management, financial leasing and insurance with a view to satisfying our customers increasingly diversified needs for integrated financial service. ICBC International Holdings Limited (ICBC International) has actively participated in Hong Kong listings by large multinational corporations and domestic companies and has developed its bond underwriting businesses, through which it has created a more balanced and stable income structure. ICBC Credit Suisse Asset Management Co., Ltd. (ICBC Credit Suisse Asset Management) has leveraged its asset management platform, continued to develop new products, expanded its investment management system and realised steady growth in business performance, taking a lead among bankaffiliated fund management companies in the PRC. ICBC Financial Leasing Co., Ltd. (ICBC Leasing) continues to work towards expanding its business, quickening its operating transformation and proactively developing leasing products. Relying on our dominant position, ICBC-AXA Assurance Co., Ltd. (ICBC-AXA) has adopted a strategy of localised and independent operations and development, deepening bancassurance cooperation and intensifying product development efforts. Our senior management team has extensive experience, and their vision has helped us maintain our leading position in the PRC banking industry. Our senior management team has extensive experience in the PRC commercial banking industry. Our chairman, Mr. Jiang Jianqing, joined us in 1984 and has over 30 years of experience in the PRC banking industry. Our president, Mr. Yi Huiman, joined us in 1985 and has nearly 30 years of experience in the PRC banking industry. Our senior management also has long term strategic vision and keen insight into the banking industry. Under their 98

101 leadership, we have established an industry-leading operating model in the PRC. We have actively responded to changes in the external environment, continued our product development and business innovations, established powerful information technology systems and became the first in the PRC banking industry to establish a comprehensive risk management system. Our senior management team has led our transformation from the PRC s largest bank to a leading international bank. Although we have faced adverse external conditions caused by the global financial crisis as well as increasing competition in the industry, we have continued our prudent operations, accelerated our business transformation and maintained smooth and steady development under the leadership of our management team. We believe that our strong management team will be able to lead us in maintaining our competitive advantages in the future, laying a solid foundation for our long term sustainable growth. OUR STRATEGIES Our goal is to become a global leading bank with the best profitability, performance and prestige. We aim to strengthen our market position in the PRC banking industry and focus on transforming ourselves into a world-class financial institution. Our overall goal is to maximise shareholder return and achieve sustainable growth. We intend to achieve this through the following strategies: Continuing to optimise our asset and liability structure. We aim to optimise our business operations by focusing on new businesses with high-growth potential, including individual loans, trade finance and loans to SMEs, as well as high-growth industries, such as service sectors and household products sectors, to further develop our customer base and targeted markets. We intend to maintain a prudent lending policy by promoting our businesses to customers in environmentally friendly sectors and reducing our exposure to industries with high energy consumption and over-capacity. With regard to liabilities, we will continue to focus on the sale of wealth management products in order to shift our focus from high-cost term deposits and to generate income from transaction fees. We also plan to focus on low-cost demand deposits and interbank deposits in order to optimise our liability structure and achieve reductions in our cost of capital. In order to optimise our income structure, we aim to continue to focus on low capital consumption intermediary businesses (namely settlement, clearing and cash management, personal wealth management and private banking, investment banking, bank cards and emerging businesses) in order to diversify our business and achieve a more stable and balanced income structure. Diversifying revenue and asset mix by expanding into higher growth non-credit businesses. We plan to diversify our revenue sources by continuing to develop our non-credit businesses. We believe that many fee and commission-based products and services will experience strong growth over the next few years as the PRC economy continues to grow, the PRC financial services sector experiences further liberalisation and our customers banking needs become more sophisticated. We plan to increase our support and investment in asset management and financial leasing businesses and to expand into other non-credit businesses such as financial insurance. In corporate banking, we intend to continue to focus our team of customer relationship managers on important customers by size while expanding the range of products and service offerings to such customers, including insurance brokerage, asset custody, cash management, bank cards and payroll services to insurance companies. We also intend to continue to improve the synergies between our corporate banking and investment banking businesses. In personal banking, we plan to further develop personal wealth management and other investment products, standardising services and distribution bank-wide to provide tailored products and services focused on high net worth customers and customer groups with high growth potential. 99

102 In our treasury business, we intend to continue to enhance our investment and trading capabilities, upgrade our trading systems, improve the quality of investment and trading personnel, develop new products and services, strengthen our liquidity management and increase the return on our non-credit assets. In addition, in light of the opportunities presented as a result of increasing globalisation of the RMB, we plan to further develop our cross-border RMB businesses and to improve our RMB settlement system. We believe that by offering a broader range of non-credit products and services coupled with prudent risk management, we will not only improve customer satisfaction and attract new customers, but also create attractive new revenue sources and improve our overall profitability. Strategically expanding our traditional branch network and enhancing sales and marketing capabilities through electronic banking operations. In order to further enhance the marketing of our products and services and to achieve greater operational efficiencies, we intend to fully leverage our advanced information technology platform and customer relationship management systems. We intend to actively cross-sell our products and services to our existing customers through our extensive network. Furthermore, we plan to expand our electronic banking operations through installing additional ATMs and upgrading our technology platforms for mobile and internet banking services to deliver more products and services to our customers in a timely, reliable and convenient manner and to further increase revenue derived from our electronic banking platform. Continuing to invest in information technology infrastructure and to utilise advanced technology to support our growing business. We aim to further invest in information technology infrastructure and to apply data analytics, cloud computing and mobile internet technologies in areas such as marketing and sales, customer services, product innovation and risk control in order to support our business. We intend to use the technology at our disposal to gain more insight into our customers demands, to increase our risk management capabilities and effectiveness, to strengthen dynamic risk assessment and real time alert controls and to develop an integrated platform combining online and offline services for our customers. Continuing to strengthen risk management and internal control systems. We believe effective risk management is an essential component of our overall business strategy. We plan to continue to align our risk management and internal control capabilities with international best practices. We intend to continue to implement enhanced risk management procedures for credit exposures, such as improving our risk warning and early identification and prevention capabilities. We are also instituting changes to further strengthen the independence of our internal control functions and to improve our bank-wide internal control systems. We also seek to continue to improve our risk management capabilities by enhancing our asset and liability management capabilities and by further centralising our risk management. Enhancing employee performance through performance-linked incentive schemes and regular training and development initiatives. We intend to continue to manage our human resources through various initiatives in order to support our business strategies. We have introduced four career tracks into our human resource system, namely, managerial, professional, sales and marketing and operational, in order to facilitate employee career development and enhance performance appraisal and remuneration measures. We intend to continue to provide training and development programmes for our employees to enhance their skills and professional development. We also intend to further improve our management and employee incentive system, including adopting an economic value-addedbased incentive scheme, such that an employee s income is tied to his or her personal performance and the 100

103 contribution made by his or her respective work units. We believe that through these initiatives, we can attract, retain, motivate and develop a workforce of high quality. OUR BUSINESS OPERATIONS Our principal businesses include corporate banking, personal banking, financial asset services and treasury operations. Corporate Banking Our corporate banking products and services include corporate deposits and loans, SME business, institutional banking business, settlement and cash management, international settlement and trade finance and investment banking. We believe we have the largest corporate banking customer base in the PRC. As at 31 December 2014 and 2015, the number of our corporate customers was 5.1 million and 5.3 million, respectively. We provide a wide range of corporate banking products and services to state owned enterprises, privately owned enterprises, foreign-invested enterprises, government authorities and other entities. Our corporate banking business has maintained a leading position in the PRC banking industry. Our corporate loan business maintained steady growth of loan portfolio size with continued optimisation of term structure and product structure. We also continue to lead the PRC in terms of the corporate deposits market, with the mix between time deposits and demand deposits being generally maintained at a steady level. Corporate Loans Corporate loans represent the largest portion of our loan portfolio. Our corporate loans include short-term loans and medium to long-term loans. As at 31 December 2014 and 2015, the balance of our corporate loans was RMB7,612.6 billion and RMB7,869.6 billion, respectively. We provide short-term loans with maturities of up to one year to our corporate banking customers. A substantial majority of our short-term corporate loans are working capital loans (including trade finance loans). In addition, we provide our corporate banking customers with bills discounting, factoring and forfeiting loans. As at 31 December 2014 and 2015, the balance of our short-term corporate loans amounted to RMB2,982.4 billion and RMB2,885.9 billion, respectively, accounting for approximately 39.2% and 36.7% of the balance of our corporate loans, respectively. Our medium to long-term corporate loans generally feature terms ranging from one year to 10 years and primarily comprise project loans and property loans. As at 31 December 2014 and 2015, the balance of our medium to longterm corporate loans amounted to RMB4,630.2 billion and RMB4,983.6 billion, respectively, accounting for approximately 60.8% and 63.3% of the balance of our corporate loans, respectively. Our corporate loans include working capital loans, project loans and property loans distributed by product line. As at 31 December 2014, the balance of our working capital loans, project loans and property loans amounted tormb3,411.1 billion, RMB 3,711.7 billion and RMB489.8 billion, respectively. As at 31 December 2015, the balance of our working capital loans, project loans and property loans amounted to RMB3,454.7 billion, RMB3,936.0 billion and RMB478.8 billion, respectively. In recent years, we have adopted the following measures to promote the stable growth and structural optimisation of our corporate loans business: in response to changes in the macroeconomic environment, we optimised the distribution of our lending and further adjusted our credit structure to promote the stable and healthy development of our credit business; 101

104 we proactively provided support for the real economy, satisfied funding needs of key national and regional projects and extended more loans to Central and Western China and Northeastern China; we allocated additional financial resources to key industries and quality customers so as to support key national projects under construction and expanded our businesses in areas such as urbanisation-related industries, basic industries and infrastructure, energy and resources, modern services industries, advanced manufacturing, cultural industries, environmental protection, energy conservation and modern agriculture; we strengthened the management of our lending to LGFVs and controlled loans to the real estate industry and industries with overcapacity, and gave financial support to various energy conservation and emission reduction projects; we accelerated the development of our supply chain financing, including providing e-supply chain financing products in order to enhance the development of trade finance and SME credit business; and we increased our efforts to compete for major corporate customers and industrial leaders, and sought new customers among core enterprises and upstream and downstream SMEs of supply chains, in an effort to achieve balanced growth of high quality large, medium and small corporate customers. Corporate Deposits We provide corporate banking customers with multiple demand and time deposit-taking services in RMB and major foreign currencies. Corporate deposits constitute our major source of funds. The maximum interest rates we are permitted to pay on regular time deposits and demand deposits are set by the PBOC. In response to challenges posed by the liberalisation of interest rates, we leveraged our advantages in integrated financial services such as corporate wealth management, cash management, e-banking and assets custody to increase our market competitiveness in the corporate deposits business. As at 31 December 2014 and 2015, the balance of our corporate deposits was RMB8,037.1billion and RMB8,437.0 billion, respectively. SME Business We offer comprehensive financial services to SMEs to satisfy their settlement and financing needs. We offer shortterm and medium to long-term financing services to SMEs as well as settlement, treasury and cash management services in relation to domestic and international trade. SMEs may obtain loans secured by their real estate properties, inventory, receivables or financial notes and guarantees as collateral, or they may obtain loans based on credit. As at 31 December 2014 and 2015, the balance of our loans to domestic SMEs (including micro enterprises) was RMB4,525.4 billion and RMB4,738.8 billion, including RMB2,803.9 billion and RMB2,855.6 billion, respectively, to medium-sized enterprises, and RMB1,721.5 billion and RMB1,883.2 billion, respectively, to small and micro enterprises. In line with the PRC government s policies to support the development of SMEs, we optimised our financial services to small and micro enterprises and have sought to provide professional, efficient and convenient financial services to SMEs. In recent years, we have implemented the following measures to promote our SME business: we promoted our specialised operations targeting SMEs and increased the number of employees qualified for SME credit business; we established an independent micro and small enterprise banking business management system, launched the pilot micro and small enterprise banking center, developed the institutions specialised in micro and small enterprise banking in a practical manner. As at 31 December 2015, we had established 154 micro and small enterprise banking centres;; 102

105 we accelerated the introduction of new products and promoted financing products for SMEs such as small business online revolving loans, credit-based lending, loans for operating assets improvement, facilities mortgages and the Easy Loan Corporate Card ; we provided financial solutions to small and micro enterprises in specialised markets and industrial clusters so as to expand our customer base; we strictly controlled credit risks to ensure the sound development of our small enterprise credit business; and we introduced pilot medium and long-term credit products such as commercial housing mortgage loans and property building loans to SMEs, and we designed tourism loans products for tourist attraction developers secured by the right to charge for the attraction. In 2011 and 2012, we were named an Excellent Service Organisation for SMEs by the China Association of Small and Medium Enterprises.. In 2013, we were awarded the Advanced Unit of National Banking Financial Institutions to Provide Financial Services for Small and Micro Enterprises by the CBRC and the Outstanding Contribution Award in Financing for Small and Medium-sized Enterprises by the China Association of Small and Medium Enterprises. In 2014 we won the Award of Outstanding Contribution to Micro and Small Enterprise Finance by National Business Daily. Institutional Banking Our institutional banking businesses include financial services provided via our cooperation with securities companies, insurance companies, other banks, governmental agencies and futures companies. In recent years, we have carried out various strategic initiatives to enhance the sustainable development of our institutional banking business. We offer diversified financial services to institutional customers covering assets, liabilities and intermediary services. We have improved financial services relating to the livelihood of our customers, such as social insurance, housing allowance, finance, education and medical care. Furthermore, we improved our diversified financial services package, initiated interbank cooperation and effectively consolidated partnership with our customers. In particular, we have implemented the following measures: we developed our five service platform systems relating to social insurance, housing allowance, finance, education and medical care and improved our diversified financial services package; we focused on developing and improving our services, explored different market segments and sought to maintain and improve our institutional banking competitiveness, which contributed to the development of our institutional banking business; we promoted inter-bank cooperation and the development of businesses such as RMB financing, payment and settlement agency, foreign exchange clearing, international settlement, trade finance, domestic foreigncurrency payment and underwriting of financial bonds; we became one of the first banks in the PRC to obtain settlement bank qualifications for the National Equity Exchange and Quotations and were also one of the first comprehensive clearing members of the Shanghai Clearing House for RMB interest rate swap centralised clearing services; with reference to new policies and regulations governing the capital markets, we strengthened the integration between our internal institutions and branches, and also expanded cooperation with securities companies in areas such as asset management, underwriting and issuance, securities clearing and other related services in order to offer innovative products for our bank-securities businesses; 103

106 we actively marketed to insurance companies to reinforce cooperation in bancassurance, payroll payment agency service, assets custody, cash management and other fields and strengthened our partnerships with commodity exchanges, introducing standard warehouse receipt pledge financing; and we successfully launched our overnight trading business for gold futures and developed an innovative account opening appointment service to help customers open accounts to facilitate the transfer between their bank accounts and futures accounts. We cooperated with other banks operating in the PRC for payment of domestic and foreign currency and bond underwriting. We have led the market in terms of the number of third-party custody customers and the amount of funds under custody for five straight years. Also, we ranked first in the PRC banking industry in terms of the amount of central finance and government business cards under agency service and the number and amount of local government bonds underwritten. Settlement and Cash Management We provide domestic clearing and settlement services for our customers and comprehensive services such as centralised cash management and transfer for large companies and their subsidiaries. We have expanded our cash management services into financial asset management and have developed a variety of management products such as management of account transactions, liquidity management, supply chain finance, investment and wealth management. We offer personalised and professional cash management service plans to meet cash needs of rapidly developing industries, including cultural industries, logistics, tourism and equipment manufacturing. We built the brand system called Caizhi Account as the core brand to enhance our influence in the cash management market. In recent years, we have implemented cluster marketing strategies to strengthen the marketing of important products, enhance the establishment of channels for corporate customers and optimise our customer structure. The Enterprise Link service integrating functions such as industrial and commercial registration, account opening, Internet banking and settlement was selectively rolled out at certain locations for a full range of comprehensive, one-stop services for new registrants. The functions of Caizhi Account were improved to enable interbank point-ofsale card transactions and self-service small deposit and withdrawal. With diversified products and service offerings, we offer comprehensive cash management solutions to corporate customers such as account management, liquidity management, collection and payment management, information service and risk management. We provide corporate groups with centralised operations management service of cross-border RMB and foreign exchange funds and cross-border cash management service based on the policies of the China (Shanghai) Pilot Free Trade Zone, extending the global cash management business to nearly 70 countries and regions. In recent years, we were named the Best Cash Management Bank in China by The Asset, Global Finance and The Asian Banker. As at 31 December 2014 and 2015, we maintained approximately 6.13 million and 6.40 million corporate settlement accounts respectively. For the year ended 31 December 2014 and 2015, our volume of corporate RMB settlement was RMB1,897 trillion and RMB2,264 trillion, respectively. As at 31 December 2014 and 2015, we had approximately 1,125,000 and 1,270,000 cash management customers, respectively; and 4,374 and 4,915 global cash management customers, respectively. Investment Banking Our investment banking business mainly includes regular financial advisory services, enterprise credit services, investment and financing advisory services, syndicated loan arrangement and management services, corporate assets and debt restructuring services, corporate acquisition and merger services, asset securitisation or quasi asset securitisation services, credit capital transfer and trading services, underwriting of corporate debt financing 104

107 instruments such as commercial paper, medium-term notes and financial bonds, direct investment advisory services, financial advisory services for corporate issuance of equities and bonds and services for equity investment funds. We provide diversified financing services for our corporate customers, quality investment products for our high networth customers and restructuring and mergers and acquisitions services for our corporate customers with global operations. For example, we advised on Guotai Junan s acquisition of Shanghai Securities and TCL Corporation s private placement and acted as mergers and acquisitions consultant for Jinjiang International s acquisition of Louvre Hotel Group and Fosun International s acquisition of Club Med. We participated in the reform of state-owned enterprise, innovated major capital financing methods and expanded bond underwriting business and equity financing business in the capital markets. We also participated in the enterprise asset securitisation business as a financial advisor, introduced the advisory service for distribution of investment banking products and improved marketing and integration of funding channels. We also enhanced our investment banking research products and strengthened the e-service channel for investment banking services. We were named the Best Investment Bank in China by Euromoney and Best Bank in Investment Banking by Securities Times for six consecutive years. In 2014 and 2015, our investment banking income was RMB30,474 million and RMB26,791 million, respectively. During the same period, we underwrote various debt financing instruments worth RMB470.0 billion and RMB1,152 billion, respectively. International Settlement and Trade Finance In recent years, we have accelerated the development of our international settlement and trade finance business and actively promoted our brand, and we believe we have established a competitive edge over our peers in the emerging international business area through the following initiatives: we leveraged our advantages in domestic and foreign currency resources and close interaction between domestic and overseas branches and improved our product portfolios by integrating financing, settlement, wealth management and trading to better serve the needs of our import and export enterprise customers; we accelerated the expansion of global supply chain products, integrated products denominated in RMB and foreign currencies and optimised our business structure; we rolled out a global documents management system, further enhancing the centralised processing efficiency of our documents management business; we strengthened our systems for checking trade backgrounds to prevent false transactions and arbitrage behaviours of enterprises; we participated in cross-border RMB pilot programmes in many regions, including the Shanghai Free Trade Zone, Khorgos Xinjiang and Qianhai Shenzhen, and we participated in the launch of various innovative services and products such as two-way RMB cross-border cash pooling and overseas RMB lending; and we improved ICBC Cross-border Express product system and launched innovative RMB cross-border products such as Direct Financing Express, agreed-upon payment and structural financing. Personal Banking Our personal banking products and services include savings deposits, personal loans, private banking, bank cards, personal wealth management and others. Following the acceleration of the liberalisation of interest rates and the rapid development of Internet-based finance, the market competition environment has become increasingly fierce. We improved our customer-oriented operating 105

108 service system, integrated service capability and advantages in retail banking. In 2015, we were named the Best Consumer Bank in China by Global Finance. As at 31 December 2014 and 2015, we had approximately 465 million and 496 million personal banking customers, respectively, with an increase of 6.7% from 2014 to During the same period, we had approximately 9.64 million and million personal loan customers, with an increase of 8.3% from 2014 to According to data from the PBOC, as at 31 December 2015, we ranked first among PRC banks in terms of the aggregate outstanding amount of personal loans. Personal Deposits We provide demand deposits and term deposits in RMB and foreign currencies. We targeted important customer groups, constantly expanded our customer base and optimised the customer structure. We promoted the ICBC Salary Manager, a financial service product based on our payroll payment agency service. Adapting to the trend of interest rate liberalisation, we enhanced our management of interest rates. The synergetic development of our wealth management products and savings deposits promoted improved circulation of customer funds within our system. As at 31 December 2014 and 2015, the balance of our personal deposits amounted to RMB7,188.6 billion and RMB7,601.1 billion, respectively, representing an increase of 5.7% from 2014 to As at 31 December 2015, our personal demand deposits and personal time deposits rose by 7.5% and 4.4%, respectively, compared to such deposits as at 31 December As at 31 December 2015, our personal banking customers financial assets reached RMB11.6 trillion compared to RMB10 trillion as at 31 December Personal Loans Loans to personal customers include residential mortgages, personal consumption loans, personal business loans and credit card overdrafts. Personal loans are a major component of our personal banking business. In recent years, residential mortgages have become an important component of our personal loans business, and have been growing in a steady and healthy manner. In light of our consumers changing consumption patterns and transaction practices, we applied Easy Loan in a wider scope. Easy Loan is an unsecured retail consumer loan product characterised by small value, speed and convenience designed to meet our customers varied financial needs. Our personal customers can pledge their financial assets and quickly and conveniently obtain loans by providing different kinds of collaterals. As at 31 December 2014 and 2015, our personal loans amounted to RMB3,063.5 billion and RMB3,541.9 billion, respectively, representing an increase of 15.6% from 2014 to Our residential mortgages as at 31 December 2015 rose by 21.5% compared to such mortgages as at 31 December According to the PBOC, we continue to rank first in the PRC banking industry in terms of personal loans as at 31 December Private Banking We provide a broad range of products and services to our private banking customers, including asset management, product selection, alternate investments, carte blanche, consultancy, financial management, cross-border financial services, wealth succession and other value-added services. Since 2013, we have increased our efforts to supplement our private banking business network and extend our product lines, forming a nationwide coverage network for high net-worth customers. We have also expanded our internet financing services, and we seek to develop comprehensive private banking products and services channels and to provide services through internet banking, mobile banking, WeChat and social networking platforms.. We have established a relatively comprehensive global network covering 22 countries and regions, where the private banking centre in Hong Kong serves as our global product development centre and additional regional centres were set up in Europe, Singapore and the Middle East. Global Wealth Management Fund of Private Banking was registered in Luxembourg as the first private equity fund established by a PRC commercial bank in the 106

109 international mainstream fund market. In 2015, we were named the Best Private Bank in China by Global Finance, FinanceAsia, The Asset and the National Business Daily. As at 31 December 2014 and 2015, we had a total of over 43,000 and 62,400 private banking customers, respectively, representing an increase of 45.1%. As at the same dates, our total assets under management in private banking business was RMB735.7 billion and RMB1 trillion, respectively. Bank Cards Business We provide personal customers with comprehensive bank card products and services, including single-currency and dual-currency credit and debit cards. Our Peony Card brand is one of the most renowned bank card brands in the PRC. In recent years, we have improved bank card service quality, increased bank card product development and further solidified our leading position in the PRC bank card industry. As at 31 December 2014 and 2015, we had issued approximately million and million bank cards, respectively, representing an increase of 12.5% from 2014 to The total annual consumption volume was RMB7,491.5 billion and RMB8,841.6 billion, respectively, representing an increase of 18.0% for the years ended 31 December 2014 and As at 31 December (in millions, except averages) Cards issued Debit cards Credit cards Year ended 31 December Annual consumption volume (billion RMB)... 7, ,841.6 Average consumption volume per card (RMB) (1)... 12,056 12,578 Note: (4) Average consumption volume per card = Consumption volume during the reporting period/average monthly cards issued during the reporting period. Credit Cards We are the largest commercial bank in the PRC in terms of the number of credit cards issued, the consumption volume via credit cards and the amount of overdraft. We offer RMB credit cards and dual-currency credit cards such as RMB-US$, RMB-EUR and RMB-HKD credit cards. Leveraging our advanced technology and large customer base, we target the needs of our customers to satisfy their unique needs. Based on our five key products of transportation card, public servant card, PetroChina card, Mutual Fund Card and commercial flight card, we seek to increase our card issuance and to improve service quality. In 2014, we upgraded the rights and interests of Peony Driver s Card and ETC Co-brand Card to better serve auto owners. A brand new credit card, named ICBC I Sports, was created to provide our customers who engage in physical exercise with discounts and privileges. To expand our business in the offshore consumption markets, we made greater effort to promote all-currency card, Global Travel Credit Card and air travel card. A larger share of the 107

110 small-value, quick payment market was seized on the strength of ICBC Cool Pass Card. With innovations in Internet-based financial products, we were the first in the PRC to have point-of-sale online by combining the four authentication methods (Internet banking payment, mobile phone verification, 3D certification and payment without presenting a bank card) for universal acceptance of bank cards by online merchants. We streamlined the promotion of Easy Loan corporate cards for small and micro merchants based on the big data technology by expanding our marketing coverage to remove the financing bottleneck of small- and medium-sized enterprises. We were named No. 1 Credit Card Brand in China by the Ministry of Industry and Information Technology and also won the Global Finance Best Commercial Corporate Credit Card and received the Best Risk Control in Asia-Pacific from Visa Inc. At the end of 2015, we had over 109 million credit cards issued. For the years ended 31 December 2014 and 2015, the consumption volume was RMB1,868.6 billion and RMB2,327.0 billion, respectively, representing an increase of 24.5% from 2014 to As at 31 December 2014 and 2015, the total overdraft of our credit cards was RMB366.2 billion and RMB419.5 billion, respectively, representing an increase of 14.5% from 2014 to Debit Cards We issue RMB debit cards and dual currency debit cards, such as RMB-U.S. dollar debit cards, to our customers. In recent years, we adopted measures to improve the safety of chip cards, promoted single chip cards and improved card replacement services. Chip cards have wider industry applications such as social security, medical care, transportation, education and electronic identification, as one card could be applied in many sectors. For the years ended 31 December 2014 and 2015, our debit card annual consumption volume was RMB5,622.9 billion and RMB6,514.6 billion, respectively, representing an increase of 15.9% from 2014 to Financial Asset Services Our financial asset services include wealth management services, asset custody services, pension services, precious metal business, franchise treasury business, asset securitisation business and agency services. In recent years, we have adopted the following measures to promote stable growth and optimise the structure of our financial asset services: we engaged in cross-industry cooperation and competition with other institutions in order to seize the market opportunities for asset management services and satisfy our customers needs for the management of their financial assets; we consolidated the Group s advantages in wealth management, custody, pension and precious metal businesses and the functions of subsidiaries specialised in investment banking, funds and insurance; we expedited the establishment of an integrated business operation system covering domestic and overseas regions across different lines of business; and we built a full-service asset management platform covering a wide range of markets and clients. Wealth Management Services We offer comprehensive asset management services to different types of clients, including individuals, corporate clients, private banking clients and institutions. In recent years, we reformed our profit centres, optimised our procedures for wealth management product development, investment management and risk management and promoted the standardised, sustainable and orderly development of the business. Also, we adapted our products in order to meet the demands of various types of customers with different risk-reward features and investments in different types of markets. 108

111 We prioritise the development of product lines such as Enhanced Return series, Stable Return series, Non-fixed Term series and Quasi-fund series. We launched the TONGLI corporate product series exclusively for customers of other banks and customised area-specific wealth management products in order to bolster the development of Western China, county areas and remote regions. We optimised product issuance and marketing strategies, and at the same time expanded online and off-line sales channels. As a result, our customers can access our wealth management products online. In 2014, we sold wealth management products totalling RMB3,898.1 billion, of which personal wealth management products totalled RMB2,067.6 billion and corporate products totalled RMB1,830.5 billion. As at 31 December 2015, our stock wealth management products sold totalled RMB2,616.6 billion, up 32% compared with the number as at 31 December Asset Custody Services We provide a range of custody services to securities investment funds, enterprise annuity, the National Council for Social Security Fund of the PRC, insurance companies, commercial banks, qualified foreign institutional investors (QFII), qualified domestic institutional investors (QDII) and other bank customers, including assets custody, investment clearing, accounting, asset valuation, transaction monitoring, collective payment and information disclosure services. In 2015, we leveraged our advantages in custody services in the capital markets and launched marketing campaigns. We successfully took custody of the first mixed ownership reform fund, the first merger and acquisition concept fund, the first fund investing into the Hong Kong market under the Shanghai-Hong Kong Stock Connect approach and the first securities broker s publicly offered fund. We actively expanded emerging custody service markets. Enterprise annuity funds under custody scaled up rapidly, giving us the largest market share among PRC banks. In 2015, we were recognised as the Best Custodian Bank in China by Global Custodian, Global Finance and The Asset. As at 31 December 2015, the total net value of our assets under custody was increased by 97.4% to RMB11.51 trillion as compared to 31 December Pension Services In recent years, leveraging on the strengths of our business qualifications, service network and advanced information systems, we have promoted the development of our pension businesses. In addition, diversifying the product system, we optimised our integrated enterprise annuity scheme Ruyi Pension Management and serial pension-related wealth management products Ruyi Benefit Plan and issued Taikang Golden Banking Co-brand Card for Special Medical Services. A variety of service channels including sales outlets, Internet banking, telephone banking and mobile banking were made available, enabling customers to have better transaction experience. Our pension services won awards from the China Banking Association such as the Best Performance Award and the Best Development Award. Since 2012, we have been the market leader in the PRC banking industry in terms of the size of our enterprise annuity funds under trusteeship, the number of individual enterprise annuity accounts and the size of total individual enterprise annuity funds under custody. As at 31 December 2014 and 2015, our pension funds under trusteeship amounted to RMB69.1 billion and RMB82.7 billion, respectively. As at the same dates, we managed approximately 13.6 million and million individual pension accounts, respectively; while pension funds under our custody totalled RMB349.7 billion and RMB439.7 billion, respectively. Precious Metals We operate four product lines in our precious metals business: physical bullion, trading, precious metals linked financing and wealth management. Due to fluctuations in the precious metals market, we adjusted our business structure and diversified our products to promote our precious metals business. In 2014, we provided precious metal trading brokerage, agency and clearing services to PRC and foreign customers and physical gold warehousing and 109

112 agency custodian services in the China (Shanghai) Pilot Free Trade Zone for foreign customers through the Shanghai Gold Exchange s International Board in the China (Shanghai) Pilot Free Trade Zone. We were recognised as the Best Precious Metal Trading Bank in China by Euromoney, China s Excellent Precious Metal Trading Bank by the Financial Times and Excellent Financial Institution Member by the Shanghai Gold Exchange. For the years ended 31 December 2014 and 2015, our total transaction amount of our precious metals business was RMB1.03 trillion and RMB1.25 trillion, respectively. For the same periods, we cleared RMB343.7 billion and RMB388.4 billion, respectively, on behalf of the Shanghai Gold Exchange. Franchise Treasury Business We offer a wide range of treasury operations services to enterprises and individual customers on an agency basis. We provide spot and forward foreign exchange trading services, swap transaction services for RMB and foreign currencies and interest rate swap for RMB. In addition, we act as an agent for foreign exchange trading on behalf of our clients 24 hours a day, and we trade foreign currency, precious metal, forward foreign currency contracts, interest rate swaps, currency swaps, options and other financial derivatives on behalf of our customers. We enhanced our service capability of personal foreign exchange settlement and sales outlets and increased the variety of trading currencies. As a result, 18 currencies have become tradable through our personal E-banking channel. We promoted usance/forward foreign exchange trading business of corporate Internet banking, further enhancing our corporate exchange trading service capabilities. We provided exchange trading for 26 currencies, leading the PRC banking industry. We completed foreign exchange settlement and sales together with franchise foreign exchange trading amounting to U.S.$726.5 billion in We launched bundled marketing of foreign exchange trading, trade finance and RMB and foreign currency-denominated deposits to meet customers currency management needs. The franchise foreign exchange trading volume hit U.S.$156.6 billion in We had paper gold, silver, platinum and palladium to offer and supported RMB and U.S.$-denominated deals under a range of flexible transaction patterns, including real-time, pending order, conversion and automatic investment. The franchise paper precious metal trading volume increased over the years to U.S.$324 billion in We issued the first counter-based China Development Bank Bond and the first counter-based Export-Import Bank of China Bond as the exclusive agent and routinised the issuance. Asset Securitisation Business Asset securitisation is the process of converting assets with low liquidity into liquid securitisation products through risk isolation, conversion and packaging of cash flows and credit enhancement. The assets with low liquidity that can be converted are generally assets with stable cash flows such as residential mortgage loans, commercial property mortgage loans, project loans and other cash generating assets. To further optimise our credit structure by means of asset and capital management, we originated credit asset securitisation projects on 6 February 2015, 10 February 2015 and 17 September 2015, respectively. Corporate loans were the underlying assets of these projects. In these projects, we served as originator and lending services provider. For the year ended 31 December 2015, our subsidiaries ICBC Leasing, ICBC Asia, ICBC Argentina and Chinese Mercantile Branch under ICBC (Asia) each originated one traditional asset securitisation product. Agency Sales We offer agency sales services for funds and insurance products. We also offer agency sales services in connection with treasury bonds. 110

113 We have actively followed market developments and have strengthened our targeted marketing strategy based on the demands of our customers. Our agency sales of funds and asset management products of securities companies for the years ended 31 December 2014 and 2015 was RMB1,062.8 billion and RMB1,037.9 billion, respectively. In the years ended 31 December 2014 and 2015, the total amount of insurance products we sold on an agency basis through distribution channels such as internet banking, self-service terminals and e-commerce platforms amounted to RMB102.7 billion and RMB166.8, respectively. Treasury Operations Our treasury operations include money market activities and investment and financing businesses. We aim to enhance the profitability of our treasury operations through product innovation, timely adjustment of investment and trading strategies, enhancement of our capital operation efficiency, improvement of management capabilities and prevention of business risks. Money Market Activities Our money market activities include: (i) short-term borrowing and lending with other banks and financial institutions; and (ii) bond repurchase and purchase. We have adopted a cautious development strategy for our business with other banks and financial institutions. We aim to increase the return on our funds, and we conduct our business activities flexibly in response to our liquidity management needs. For the years ended 31 December 2014 and 2015, our domestic trading amount in the interbank market was RMB15.3 trillion and RMB52.26 trillion, respectively, of which RMB11.3 trillion and RMB50.36 trillion, respectively, comprised lending. In respect of foreign currencies, we aim to increase the return on our funds while ensuring sufficient liquidity. We have strengthened the management of our foreign currency funds position to secure the safety of foreign exchange payments. In addition, we have closely monitored market developments and cautiously selected counterparties to mitigate credit risk; we have also arranged term structures to improve the yields of our foreign currency fund operations. For the years ended 31 December 2014 and 2015,, our foreign currency transaction volume in money markets was U.S.$198.6 billion and U.S.$156.6 billion, respectively. Investment We make investments in RMB-denominated bonds issued by the Chinese government, the PBOC, policy banks and a few other local financial institutions, short-term commercial paper issued by domestic enterprises, and foreign currency bonds issued by foreign governments, financial institutions, and corporations. We also trade bonds and bills that are issued by the Chinese government, the PBOC and foreign governments as well as derivatives, foreign exchange and foreign/local currency dominated bonds. In respect of our trading book investment, we have adopted swing trading and trend trading strategies, and we trade according to market trends. We have strictly managed credit risks and increased holdings of treasury bonds and policy financial bonds where appropriate. For the years ended 31 December 2014 and 2015, the total transaction volume of RMB bonds in our trading book was RMB246.6 billion and RMB588.9, respectively. In respect of banking book investment, we take into consideration of the trends in the market. We have moderately increased the proportion of our investment in quality credit bonds and policy financial bonds with comparatively high value and have increased our holdings of medium term bonds to optimise the structure of our investment portfolio and increase return. In respect of foreign currency bonds, we have proactively adjusted our trading strategies to increase profitability. For the years ended 31 December 2014 and 2015, the total transaction volume of foreign currency bonds in our trading book was U.S.$12.2 billion and U.S.$10.1 billion, respectively. For banking book investments, we also actively managed currency risks and adjusted the maturity profile of investments. We have continued to increase investments in quality corporate bonds, flexibly adjusted the regions and currencies in which we invest and decreased the risks of our investment portfolio. 111

114 Financing We engage in active liability management. We have diversified the sources of funding from different channels and with different tenors through a variety of active liability management instruments such as interbank certificates of deposit and financial bonds to support the growth of our business. On 12 November 2013, the Bank s issuance of RMB2.0 billion offshore RMB bonds in London became the first direct issuance of offshore RMB bonds by a head office of a PRC financial institution in the London market. As one of the pilot institutions, we successfully issued interbank deposits in the amount of RMB3.0 billion on 12 December In 2014, our head office offered RMB bonds totalling RMB2.5 billion in Hong Kong and eight issues of interbank CDs totalling RMB10,640 million in the domestic interbank market.. In August 2014, we publicly offered RMB20.0 billion ICBC tier 2 capital bonds in the national interbank market with a tenor of 10 years. On 15 June 2015, we issued our first tranche of large-amount certificates of deposit. DISTRIBUTION CHANNELS We deliver our products and services through a variety of distribution channels. We have built an integrated distribution system that enables online and offline integration, making the system available to our customers through any single point of access. We continue to improve the layout of physical outlets and expand the network in key regions and emerging markets at a moderate pace. Physical Outlets We have an established presence in six continents, with a global network covering 42 countries and regions as of 31 December In addition, through our equity participation in Standard Bank Group Limited, we indirectly cover 20 countries in Africa. We provide comprehensive financial products and services to over five million corporate customers and 496 million personal customers via our distribution channels consisting of 17,094 domestic institutions, 404 overseas institutions and 1,611 overseas correspondant banks in 147 countries as of 31 December 2015, as well as through our E-banking network comprising a range of Internet and telephone banking services and self-service banking centres, forming a diversified and internationalised operating structure focusing on commercial banking business and maintaining a leading position in the domestic market in the commercial banking sector. We started a reform to standardise operational management throughout outlets, built an operational management platform and formulated operating standards, including operating status, high/low counter allocation, post setting and teller allocation of outlets, to optimise their resource allocation. In addition, we improved the layout of physical outlets and moderately expanded the channel network in key regions, areas with potential and emerging markets. We also upgraded and adjusted outlets with low efficiency and completed upgrading and adjustment of 607 outlets with low efficiency by diversified means of merger, relocation and renovation. Moreover, we reinforced coordination and allocation as well as service collaboration between self-service banking and physical outlets, introduced the intelligent service mode on a pilot basis at selected locations, and continued to enhance the service efficiency of outlets. 112

115 Electronic Banking We closely followed the trend of mobile, personalised and intelligent banking, intensified innovation and implementation of E-banking products and services, and built an integrated and open E-banking platform. We continued to build the overseas E-banking channel and launched overseas products such as trade finance of overseas corporate Internet banking and corporate Internet banking cross-border authorisation, ensuring global distribution of our overseas E-banking business. In 2015, our E-banking transaction volume topped RMB592 trillion and the number of E-banking transactions accounted for 90.2% of our total transactions, representing an increase of 4.2 percentage points from the previous year. Internet Banking We provide internet banking services through our official website at to a wide range of customers. We also provide large corporate, governmental and financial institution customers with specialised products and services. We have further enriched our Internet banking product lines. Innovative products, including a simplified version of personal Internet banking, electronic lottery and corporate B2B settlement-backed electronic bills, were launched to solidify our core competitive edge in Internet banking. A series of marketing activities such as Home, My Environment Contribution were carried out to effectively increase the number of transactions via electronic channels regarding remittance, fund, wealth management, precious metals and our other businesses. We were named the Best Corporate/Institutional Internet Bank in China by Global Finance for the fourth time in Telephone Banking We provide telephone banking service 24 hours per day and 365 days per year through 95588, accessible in all areas of the PRC, and , accessible in Hong Kong. We optimised the self-service menu of telephone banking and set up an information management platform for customer service centres, shaping a management system with a full range of functions and intelligent services. We also upgraded the self-service voice service of telephone banking, strengthened inter-channel development and customer diversion from staff service to self-service voice service, and enhanced the value creation capacity of telephone banking. Furthermore, we expanded customer service channels, resulting in a daily average business volume exceeding 600,000 transactions of SMS banking and WeChat banking, as well as more convenient and efficient services offered. Mobile Banking We continuously enriched business features of mobile banking, launching a credit card mobile application service, remittance to any mobile phone number and other distinctive services. We created more features in our mobile application to satisfy our customers needs in particular real-life scenarios such as car rental and medical care. We also upgraded the safety of mobile banking products, optimised the user interactive interface and improved customer experience. As at 31 December 2015, the number of our mobile banking customers exceeded 190 million. Selfservice Banking We intensified our efforts in improving our self-service banking, achieving initial results in intelligent service. Emerging areas including the commodity trading market and the extension of service channels to key counties. We optimised the transaction process of self-service terminals and increased the amount of personal insurance sales by new agents. As at 31 December 2015 we owned 29,043 self-service banking outlets and 99,789 ATMs. The volume of ATM transactions at the end of 2015 amounted to RMB12,666.8 billion, up by 16.7% from INTERNET-BASED FINANCE 113

116 We improved our Internet-based services, and built a comprehensive Internet-based financial service and operational system, integrating five major functions of fundraising, finance, trade, commerce and information. Platform Targeting well-known merchants, commodities and stores, we officially launched the B2C e-mall platform integrating online shopping and consumer credit, which gathered brand products under direct sales relating to finance, digital home appliances, automobile, clothing and shoes, food and beverage, jewellery and other sectors. We also researched and developed the B2B e-mall platform targeting corporate customers, offering supply chain, specialised wholesale and other market modes. Caizhi Trade Link products were launched to provide financial service solutions integrating accounts, payment and financing for B2B electronic trading market. Social Networking Platform We formally launched the social networking platform and mobile financial information service platform to set up social circles between customers, customer managers, online customer service and institutions inside and outside us. It renders intelligent and convenient services for customers through voice, text, picture and video, forming a uniform platform for financial services and social communication. Direct Banking Platform We built an open-ended direct banking platform to better attract, obtain and serve customers through the Internet. It includes electronic account opening, deposit taking, investment, transaction and other core functions, providing allin-one online financial services for customers. Payment Product Line We introduced the online point-of-sale cashier product, with which merchants can accept domestic and overseas bank cards. We also launched the open-ended multi-channel general payment platform and added new payment channels via mobile banking and an open-ended website to support bill payment for customers of other banks. ICBC e-payment products were upgraded to facilitate small-value payments on the Internet. Financing Product Line We improved our Easy Loan products. Customers may apply for loans through Internet banking, mobile banking, SMS banking and other channels during or after purchase. Loans are reviewed and approved automatically by the system and loan funds can be transferred to customers accounts real-time. The self-service pledged loan platform of personal Internet banking is equipped with a new feature regarding partial pledge of wealth management products, paper precious metals and book-entry treasury bonds. Mobile banking was also added as a new channel for handling pledged loans. Investment and Financing Product Line We launched the transaction terminal ICBC e-investment, which integrates express delivery of market information, professional analysis, in-depth information, efficient transaction and other functions to satisfy our customers investment needs for paper precious metals, paper crude oil, franchise foreign exchange, paper agricultural products and others. Online and Offline Integration We explored online-to-offline business modes and integrated online and offline channels to provide integrated services for customers whenever and wherever possible. E-banking account and authentication systems were integrated to establish a unified customer-oriented electronic authentication system. Moreover, we strengthened 114

117 collaboration of our online and offline services and introduced the foreign currency online appointment and offline cash withdrawal service. INTERNATIONAL OPERATIONS AND DIVERSIFIED OPERATIONS We steadily internationalised and diversified our operation and development. We further improved the distribution of our global services networks, and enhanced our core market penetration rates and local operations. In 2014, Industrial and Commercial Bank of China (New Zealand) Limited, Kuwait branch, Riyadh branch and London branch officially started business, and our Yangon branch and Mexico subsidiary have obtained regulatory approval. As the share acquisition of Standard Bank Plc obtained regulatory approval, we became the first PRC-funded bank to acquire an institution engaging in transactions in the commodity, capital and monetary market overseas. We hold % shares of Tekstilbank as at 31 December ICBC Credit Suisse Asset Management increased its size of funds under management, achieving balanced growth in both size and profit. ICBC Leasing solidified its leading position in the industry. ICBC-AXA seized the market development opportunity in life insurance, improving its profitability. ICBC International proactively promoted large-sized transnational companies and domestic enterprise listings in Hong Kong, further stabilising its profit structure. As at 31 December 2015, we had 17,094 domestic institutions and 404 overseas institutions in 42 countries and regions and indirectly covered 20 African countries through our equity participation in Standard Bank Group Limited. We also established correspondent relationships with 1,611 overseas banks in 147 countries and regions, with a service network covering Asia, Africa, Latin America, Europe, North America and Australia, including major international financial centres. We have strengthened our network by adjusting the geographical allocation of our branch network and upgrading outlets. Major Indicators for Our Overseas Institutions The following tables set forth, as at the dates and for the periods indicated, the distribution of the total assets, profit before tax and total number of institutions of our international operations by geographic area. Assets Profit before tax Number of institutions As at 31 December Year ended 31 December As at 31 December (in U.S.$ millions) Hong Kong and Macau , ,110 1,543 1, Asia-Pacific region (except Hong Kong and Macau)... 67,323 62, Europe... 56,089 22, America... 55,853 52, Africa (1)... 3,295 4, Eliminations... (38,718) (23,838) Total , ,996 3,166 3, Note: (1) THE ASSETS REPRESENT THE BALANCE OF OUR INVESTMENT IN STANDARD BANK AS AT THE DATES INDICATED, AND THE PROFIT BEFORE TAX REPRESENTS OUR GAIN ON INVESTMENT RECOGNISED BY THE BANK FOR THE PERIODS INDICATED. 115

118 Our Singapore branch, Luxembourg branch, Doha (QFC) branch, ICBC (Thai) and ICBC (Canada) successively obtained authorisation from the PBOC to act as RMB business clearing banks in their respective countries and regions. Consequently, we became the first financial institution with RMB clearing banks across the Asian, European and North American time zones. As at 31 December 2015, our RMB clearing network covered 75 countries and regions around the world. As at 31 December 2015, our overseas institutions had made loans to offshore institutions of U.S.$144.1 billion, held customer deposits of U.S.$86.8 billion and realised profits before taxation of U.S.$3.2 billion. We boosted business product innovation and bolstered the establishment of the offshore RMB market. ICBC (Asia) promoted the completion of the issuance and trading of the first International Finance Corporation (IFC) RMB bond in London Stock Exchange. The RMB clearing business in our Singapore branch realised significant growth in business volume and its Lion City bonds underwriting accounted for 68.5% of the market. ICBC (Europe) successfully issued the European UCITS fund, becoming the first Chinese-funded institution entering the European investment fund industry. We offered cross-border RMB bi-directional fund pool and completed the first crossborder RMB loan disbursement and the first cross-border merger and acquisition in the China (Shanghai) Pilot Free Trade Zone. We established the first sovereign wealth fund in Shenzhen Qianhai. In 2014 and 2015, the volume of our cross-border RMB business were RMB3.66 trillion and RMB4.41 trillion, respectively, increasing by 65.7% and 20.6%, respectively, over the previous year. CONTROLLED SUBSIDIARIES AND MAJOR EQUITY PARTICIPATING COMPANY Overseas Subsidiaries INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ASIA) LIMITED (ICBC (Asia)) ICBC (Asia) is a wholly owned subsidiary and a Hong Kong registered bank. It has an issued share capital of HK$36,379 million. It provides comprehensive commercial banking services and its major businesses include commercial credit, trade finance, investment service, retail banking, e-banking, custody, credit card, receiving bank services for IPOs and dividend distributions. As at 31 December 2015, ICBC (Asia) recorded total assets of U.S.$94,679 million and net assets of U.S.$9,129 million. It generated a net profit of U.S.$875 million for the year ended 31 December On 31 May 2016, the Board of the Bank resolved that ICBC Asia establish Sino-CEE Financial Holding Corporation (CEE Financial Corporation) in Hong Kong with an investment of EUR1 billion (or its equivalent in other currencies). The CEE Financial Corporation will be wholly owned by ICBC Asia. The CEE Financial Corporation intends to establish market funds to raise funds from Central and Eastern European governments (or their authorised agencies) and other markets around the world. In particular, the CEE Financial Corporation intends to invest in infrastructure and international capacity cooperation projects. ICBC INTERNATIONAL HOLDINGS LIMITED ICBC International is a wholly owned subsidiary as well as a fully-licensed investment bank based in Hong Kong. It has a paid-up capital of HK$4,882 million. It mainly renders a variety of investment banking services, including but not limited to listing sponsorship and underwriting, equity financing, bond financing, securities brokerage and fund management. As at 31 December 2015, ICBC International recorded total assets of U.S.$2,087 million and net assets of U.S.$901 million. It generated a net profit of U.S.$99 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MACAU) LIMITED (ICBC (Macau)) ICBC (Macau) is the largest local legal banking entity in Macau. It has a share capital of MOP589 million, in which we hold an 89.33% stake. ICBC (Macau) mainly engages in comprehensive commercial banking services such as deposit, loan, trade finance and international settlement. As at 31 December 2015, it recorded total assets of 116

119 U.S.$24,039 million and net assets of U.S.$2,120 million. It generated a net profit of U.S.$264 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (MALAYSIA) BERHAD (ICBC (Malaysia)) ICBC (Malaysia) is a wholly owned subsidiary established in Malaysia. With a registered capital of MYR331 million, it is able to provide a full range of commercial banking services. As at 31 December 2015, it recorded total assets of U.S.$949 million and net assets of U.S.$96 million. It generated a net profit of U.S.$6.60 million for the year ended 31 December PT. BANK ICBC INDONESIA (ICBC (Indonesia)) ICBC (Indonesia) is a fully licensed commercial banking subsidiary registered in Indonesia, with a paid-up capital of IDR2.69 trillion, in which we hold a 98.61% stake. ICBC (Indonesia) mainly specialises in financial services such as deposit, loan and trade finance, settlement, agency services, inter-bank borrowing and lending and foreign exchange. As at 31 December 2015, it recorded total assets of U.S.$3,217 million and net assets of U.S.$288 million. It generated a net profit of U.S.$41.28 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (THAI) PUBLIC COMPANY LIMITED (ICBC (Thai)) ICBC (Thai), a subsidiary in Thailand, has a registered capital of THB20,132 million, of which we hold a 97.86% stake. ICBC (Thai) holds a comprehensive banking license and provides various services including deposit, loan, trade finance, remittance, settlement, leasing and consulting. As at 31 December 2015, it recorded total assets of U.S.$5,071 million and net assets of U.S.$682 million. It generated a net profit of U.S.$37.09 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ALMATY) JOINT STOCK COMPANY (ICBC (Almaty)) ICBC (Almaty), a wholly owned subsidiary, was incorporated in Kazakhstan with a registered capital of KZT8,933 million. It principally engages in commercial banking services such as deposit, loan, international settlement and trade finance, foreign currency exchange, guarantee, account management, internet banking and bank card service. As at 31 December 2015, it recorded total assets of U.S.$314 million and net assets of U.S.$43.23 million. It generated a net profit of U.S.$5.88 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (NEW ZEALAND) LIMITED ICBC (New Zealand), is a wholly owned subsidiary. On 26 February 2014, it officially started business with registered capital of NZD60,377,700. Its scope of business covers financial services such as account management, transfer and remittance, international settlement, trade finance and corporate credit. As at 31 December 2015, it recorded total assets of U.S.$508 million and net assets of U.S.$37 million. INDUSTRIAL AND COMMERCIAL BANK OF CHINA (LONDON) PLC (ICBC (London)) ICBC (London), a wholly-owned subsidiary, was incorporated in the United Kingdom with a registered capital of U.S.$200 million. It provides a full spectrum of banking services such as exchange and remittance, loan, trade finance, international settlement, funds clearing, agency and custody. At the end of 2015, ICBC (London) recorded total assets of U.S.$3,213 million and net assets of U.S.$358 million. It generated a net profit of U.S.$34.44 million during the year. INDUSTRIAL AND COMMERCIAL BANK OF CHINA (EUROPE) S.A. (ICBC (Europe)) ICBC (Europe), a wholly owned subsidiary, was incorporated in Luxembourg with a registered capital totalling EUR437 million. Paris Branch, Amsterdam Branch, Brussels Branch, Milan Branch, Madrid Branch and Warsaw 117

120 Branch are structured under ICBC (Europe), which mainly offers corporate and retail banking services such as deposit, withdrawal, remittance, settlement, loan, trade finance, capital, investment banking, custody and franchise wealth management. As at 31 December 2015, it recorded total assets of U.S.$8,210 million and net assets of U.S.$619 million. It generated a net profit of U.S.$34.53 million for the year ended 31 December BANK ICBC (JOINT STOCK COMPANY) (Bank ICBC (JSC)) Bank ICBC (JSC), a wholly owned subsidiary, was incorporated in Russia with a registered capital of RUB2.31 billion. It mainly provides a full spectrum of corporate banking services including loan, settlement, trade finance, deposit, foreign currency exchange, franchise treasury business, global cash management, corporate financial consulting and financing arrangement in bond markets, opening accounts in various currencies for financial institutions and handling interbank clearing, as well as remittance for natural persons without an account. ICBC (Moscow) is a ruble clearing bank for RMB trading against ruble on China Foreign Exchange Trade System, an important market maker and RMB clearing bank for RMB trading against ruble on MICEX-RTS. As at 31 December 2015, it recorded total assets of U.S.$945 million and net assets of U.S.$59.68 million. It generated a net profit of U.S.$16.80 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (CANADA) (ICBC (Canada)) ICBC (Canada) is a subsidiary in Canada with a paid-up capital of CAD158 million, in which we hold an 80% stake. Holding a full-functional commercial banking license, ICBC (Canada) became RMB clearing bank in North America on 9 November 2014, providing various corporate and retail banking services such as deposit, loan, settlement remittance, trade finance, foreign exchange trading, funds clearing, RMB cross-border settlement, RMB currency notes, cash management, e-banking, bank card and investment and financing information consulting service. As at 31 December 2015, it recorded total assets of U.S.$1,107 million and net assets of U.S.$149 million. It generated a net profit of U.S.$9.67 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA FINANCIAL SERVICES LLC (ICBCFS) ICBCFS is a wholly owned subsidiary in the United States and has a registered capital of U.S.$50.0 million. It mainly specialises in securities clearing business in Europe and America and offers professional banking services including securities clearing, settlement and financing, accounting and transaction statement in European and American markets for institutional customers. As at 31 December 2015, it recorded total assets of U.S.$31,820 million and net assets of U.S.$ million. It generated a net profit of U.S.$16.85 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (USA) NA (ICBC (USA)) ICBC (USA), a controlled subsidiary in the United States, has a paid-up capital of U.S.$309 million, of which we hold an 80% stake. Holding a fully-functional commercial banking license registered in the UFIQAC, ICBC (USA) is a member of the United States Federal Deposit Insurance Corporation, providing corporate and retail banking services such as deposit, loan, settlement and remittance, trade finance, cross-border settlement, cash management, e-banking and bank card services. As at 31 December 2015, it recorded total assets of U.S.$1,714 million and net assets of U.S.$314 million. It generated a net profit of U.S.$3.48 million for the year ended 31 December INDUSTRIAL AND COMMERCIAL BANK OF CHINA (ARGENTINA) S.A. ICBC (Argentina), our controlled subsidiary in Argentina, has a paid-up capital of ARS1,345 million, of which we hold an 80% stake. With a fully-functional commercial banking license, ICBC (Argentina) specialises in deposit, loan, settlement and remittance, trade finance, foreign exchange trading, capital settlement, financial market, offshore finance, cash management, investment banking, e-banking, credit card services, retail banking and SME business. As at 31 December 2015, it recorded total assets of U.S.$4,475 million and net assets of U.S.$534 million, respectively. It generated a net profit of U.S.$168 million for the year ended 31 December

121 INDUSTRIAL AND COMMERCIAL BANK OF CHINA (BRASIL) S.A. (ICBC (Brasil)) ICBC (Brasil), a subsidiary of the Bank, has a registered capital of BRL202 million, in which the Bank holds a 99.99% stake. ICBC (Brasil) mainly engages in commercial banking and investment banking services such as deposit, loan, trade finance, international settlement, fund transaction, franchise wealth management and financial advisory services. As at 31 December 2015, it recorded total assets of U.S.$241 million and net assets of U.S.$52.96 million. It generated a net profit of U.S.$2.42 million for the year ended 31 December ICBC PERU BANK (ICBC (Peru)) ICBC (Peru), a wholly owned subsidiary of the Bank in Peru, officially started business on 6 February 2014 with a registered capital of U.S.$50.00 million. Holding a fully functional commercial banking license, it offers corporate deposit, loan, financial leasing, international settlement, trade finance foreign exchange trading, offshore finance, e- banking and other services. As at 31 December 2015, it recorded total assets of U.S.$146 million and net assets of U.S.$29.56 million. INDUSTRIAL AND COMMERCIAL BANK OF CHINA MEXICO S.A. (ICBC (Mexico)) ICBC (Mexico), a wholly-owned subsidiary of the Bank in Mexico, has a paid-up capital of MXN664 million. Holding a fully functional commercial banking license, ICBC (Mexico) is a member of Asociacion de bancos de Mexico and is now going through the pre-opening inspections by Mexican regulators. In the initial stage of operation, it intends to provide corporate deposit, loan, international settlement, trade finance and foreign exchange trading services. At the end of 2015, ICBC (Mexico) recorded total assets of U.S.$36.93 million and net assets of U.S.$36.42 million. ICBC TURKEY BANK Anonim Şirketi (ICBC (Turkey)) ICBC (Turkey), the first Chinese commercial bank in Turkey, holds commercial banking, investment banking and asset management licenses, with a share capital of TRY420 million. The Bank holds % of its total stake. It provides corporate customers with a basket of local and foreign currency-denominated financial services including RMB deposit, RMB loan, project lending, syndicated loan, trade finance, small and medium-sized enterprise loan, investment and financing advisory, and renders personal customers versatile local and foreign currencydenominated financial services such as RMB deposit, remittance, personal consumption loan, residential mortgages and credit card business. At the end of 2015, ICBC (Turkey) recorded total assets of U.S.$2,274 million and net assets of U.S.$205 million. ICBC STANDARD BANK PLC (ICBC Standard Bank) ICBC Standard Bank, a subsidiary of the Bank in the United Kingdom, has an issued share capital of U.S.$1,083 million, in which the Bank holds a 60% stake directly. ICBC Standard Bank mainly provides global commodity trading businesses covering base metals, precious metals, bulk commodities and energy and global financial markets services such as foreign exchange, interest rate, unsecured products and equities. With its headquarters in London as the major business entity, ICBC Standard Bank has ICBC Standard Resources (China) Ltd., ICBC Standard NY Holdings Inc., ICBC Standard Securities Inc. and ICBC Standard Resources (America) Inc, as well as four branches in Singapore, Tokyo, Hong Kong and Dubai, and Shanghai Representative Office under it. At the end of 2015, ICBC Standard Bank recorded total assets of U.S.$20,121 million and net assets of U.S.$1,093 million. Major Domestic Subsidiaries ICBC CREDIT SUISSE ASSET MANAGEMENT CO., LTD. ICBC Credit Suisse Asset Management, a subsidiary of the Bank, has a registered capital of RMB200 million, in which we hold an 80% stake. It mainly engages in fund placement, fund distribution, asset management and such other businesses as are approved by the China Securities Regulatory Commission (CSRC), and owns many business 119

122 qualifications including public fund, QDII, enterprise annuity, specific asset management, domestic and overseas investment manager of social security fund, RQFII, insurance asset management and special asset management. It is one of the fund companies with full qualification in the industry. ICBC Credit Suisse Asset Management (International) and ICBC Credit Suisse Investment are structured under ICBC Credit Suisse Asset Management. As at 31 December 2015, ICBC Credit Suisse Asset Management managed a total of 74 public funds and over 170 enterprise annuities and special account portfolios, and the size of the assets under management amounted to over RMB950 billion. As at the end of 2015, it recorded total assets of RMB3,942 million and net assets of RMB2,839 million. It generated an annual net profit of RMB1,290 million for the year ended 31 December ICBC FINANCIAL LEASING CO., LTD. ICBC Leasing, our wholly owned subsidiary, has a registered capital of RMB11.0 billion. It mainly engages in financial leasing in the fields of aviation, shipping and large-scale equipment and provides a variety of financial and industrial services including rental assignment, investment funds, securitisation of investment assets, and assets transactions and management. As at 31 December 2015, ICBC Leasing recorded total assets of RMB298.7 billion and net assets of RMB22.5 billion. It generated a net profit of RMB3,034 million for the year ended 31 December ICBC-AXA ASSURANCE CO., LTD. ICBC-AXA, a subsidiary in which we hold a 60% stake, has a registered capital of RMB8,705 million. ICBC-AXA engages in a variety of insurance businesses such as life insurance, health insurance and accident insurance, and reinsurance of these businesses, businesses in which use of insurance capital is permitted by laws and regulations of the State and other businesses approved by the China Insurance Regulatory Commission (the CIRC). As at 31 December 2015, it recorded total assets of RMB66,568 million and net assets of RMB10,176 million. It generated a net profit of RMB 450 million for the year ended 31 December Majority Equity Participation Company STANDARD BANK GROUP LIMITED (Standard Bank Group) Standard Bank Group Limited is the largest commercial bank in Africa. Its scope of business covers commercial banking, investment banking, life insurance business and other areas. We hold 20.08% of the ordinary shares of Standard Bank Group Limited, and maintain frequent strategic cooperation and exchange with it. In 2015, ICBC and Standard Bank Group Limited entered into a Five-year Action Framework for Promoting the Comprehensive Strategic Partnership, thereby ushering the bilateral strategic cooperation into a new stage. As at 31 December 2015, Standard Bank Group Limited recorded total assets of ZAR1,979,349 million and net assets of ZAR178,908 million. It generated an annual net profit of ZAR23,754 million for the year ended 31 December IT-BASED BANKING DEVELOPMENT We continued to improve the big data basis for IT-based banking development, input data of financial market, e- commerce platform and comprehensive subsidiaries as data warehouse, and incorporated personal Internet banking logs and other unstructured data into the Group s database. We strengthened data analysis mining and application in terms of e-commerce, risk management, precision marketing and product classification. We integrated business handling process, continued to improve consolidation of customer information and optimised our customer-oriented marketing assessment system. We also improved our financial asset service system and implemented full-process management on asset investment and operation. Furthermore, we advanced the system building in our international and diversified operations with FOVA covering 38 overseas institutions, and accomplished comprehensive business system development in ICBC-AXA, ICBC Credit Suisse Investment Management and other subsidiaries. Our information system maintained stable and secure operations. We have acquired the capability to switch our citywide host systems in two technical parks within several minutes, and transformed from traditional disaster recovery 120

123 mode to dual-centre parallel mode to ensure the around-the-clock operation of our global business. We continued to build the group-wide daily administrative mechanism on information security and conducted tiered authorisation and information protection. We reformed the financial IC card, mobile payment and other application systems, enhanced our controllability on information security protection and reinforced security protection measures for customer service system. In 2015, we obtained 47 new patents from the State Intellectual Property Office, and the total number of patents that we owned increased to 404 as at the end of INTELLECTUAL PROPERTY RIGHTS We conduct our business under the name of Industrial and Commercial Bank of China. We own over 300 PRC registered trademarks and over 30 Hong Kong registered trademarks and are currently applying for additional registered trademarks in the PRC. We are also the registered owner of the domain names of our websites such as and The trademark (individually and collectively with our Chinese and/or English name), for which we have the copyright, has been widely used on our signboards, badges, publicity materials and internal documents. HUMAN RESOURCES MANAGEMENT As at 31 December 2015, we had 466,346 employees worldwide (excluding labour dispatched for services), representing an increase of 4,064 employees compared with the number as at 31 December Of our employees, 5,076 were employed by our major domestic subsidiaries and 14,428 were employed by our overseas institutions. In addition, we had 489 dispatched workers as at 31 December Based on our bank-wide information-based, internationalised and diversified development strategy, we adhered to the concept of humanity, service collaboration and scientific management, and continued to strive for innovation in our human resources management philosophy and methods as well as system and mechanism. We strengthened our human resources system, continued our corporate officer structure reform and optimised corporate rank titles. We improved the remuneration incentive mechanism and expanded the career development platform for our employees. In addition, we enhanced our human resources allocation and improved the supporting mechanism for selection, utilisation, cultivation and preservation of talents. We carried forward the institutional reform and in-depth human resources management project. Through our focus on employee training and qualification authentication system, we enhanced the professional competence of our employees. We reinforced training innovation through the study+practice dualistic training mode and the training evaluation and feedback mechanism of compulsory examination for each training course. In addition, we built a knowledge sharing platform and pushed information to front-line staff on a real-time basis. We set up the ICBC College website on the intranet, explored to launch ICBC mobile learning, and organised bankwide reading series activities, providing a diversified and multi-channel learning path for our employees. In 2015, we organised approximately 52,000 training sessions for approximately 4.15 million persons, with an average of 11.4 days per person. The Bank also continued to strengthen corporate culture. It promoted the ethical values of openness and transparency, scrupulousness in separating public from private interests, self-discipline and the disciplining of others, placing equal importance on honesty and diligence to guide the development of incorruptible culture. It emphasised public praise in order to set examples and highlight persons with outstanding performance. LEGAL AND REGULATORY PROCEEDINGS We are involved in legal proceedings in the ordinary course of our business. Most of the legal proceedings were initiated by us for recovering NPLs, while some legal proceedings arose from customer disputes. As at 31 December 2015, the aggregate amount of pending legal proceedings in which we acted as defendant was RMB4,715 million, accounting for around 0.02% of our total assets as at the same date. We do not expect any material adverse effect from these pending legal proceedings on our business, financial position and results of operations. 121

124 We strictly comply with applicable anti-money laundering, anti-bribery and anti-terrorism laws and other regulations in the PRC, Hong Kong, Singapore and other jurisdictions where we have operations. We actively fulfil our obligations and responsibilities in terms of anti-money laundering by coordinating the establishment of antimoney laundering policies, systems, including a specialist team. We have carried out customer identification, large amount and suspicious transaction reporting, money laundering risk assessment, anti-money laundering training and audits, which have improved the anti-money laundering and anti-terrorist financing compliance capabilities of the Group. As at 31 December 2015, we were not aware of any material money laundering, anti-bribery or terrorist financing activities engaged in by or involving any employee of our domestic or overseas branches or subsidiaries. 122

125 216,836 RECENT DEVELOPMENTS Announcement of our unaudited consolidated financial results as at and for the three months ended 31 March 2016 On 28 April 2016, we announced our unaudited consolidated financial results as at and for the three months ended 31 March We also reported additional financial and operating indicators. The following table sets forth, for the periods indicated, our consolidated statement of profit or loss. Where indicated financial information set forth in this section is extracted/derived from our audited financial statements for the year ended 31 December Unless otherwise specifically stated so, all other financial information in this section is not extracted/derived from our audited financial statements. For the three months ended 31 March (in RMB millions) Interest income... [ 200,475 Interest expense... (91,553) (81,665) Net interest income , ,810 Fee and commission income... 40,728 47,744 Fee and commission expense... (3,518) (4,259) Net fee and commission income... 37,210 43,485 Net loss on financial assets and liabilities designated at fair value through profit or loss... (2,601) 36 Net gain on financial investments ,351 Other operating income, net... 4,150 3,581 Operating income , ,992 Impairment losses on: Loans and advances to customers... (20,803) (23,123) Others (545) Operating profit... 96,148 97,414 Share of profits of associates and joint ventures Profit before taxation... 97,019 97,922 Income tax expense... (22,562) (23,018) Profit for the period... 74,457 74,

126 The following table sets forth, as at the dates indicated, our consolidated statement of financial position. As at As at 31 December 31 March (in RMB millions) Assets Cash and balances with central banks... 3,059,633 (1) 3,323,225 Due from banks and other financial institutions ,793 (1) 636,404 Financial assets held for trading ,838 (1) 180,031 Financial assets designated at fair value through profit or loss ,434 (1) 248,589 Derivative financial assets... 78,870 (1) 96,446 Reverse repurchase agreements ,333 (1) 687,354 Loans and advances to customers... 11,652,812 (1) 12,056,705 Financial investments... 4,666,691 (1) 4,846,824 Investments in associates and joint ventures... 24,185 (1) 25,213 Property and equipment ,426 (1) 223,868 Deferred income tax assets... 21,066 (1) 18,619 Other assets ,699 (1) 540,047 Total assets... 22,209,780 (1) 22,883,325 Liabilities Due to central banks (1) 182 Financial liabilities designated at fair value through profit or loss ,927 (1) 353,508 Derivative financial liabilities... 76,826 (1) 97,339 Due to banks and other financial institutions... 2,265,860 (1) 2,049,534 Repurchase agreements ,191 (1) 328,210 Certificates of deposit ,352 (1) 168,636 Due to customers... 16,281,939 (1) 17,038,081 Income tax payable... 63,266 (1) 74,309 Deferred income tax liabilities (1) 898 Debt securities issued ,622 (1) 311,938 Other liabilities ,073 (1) 586,611 Total liabilities... 20,409,261 (1) 21,009,246 Total equity... 1,800,519 (1) 1,874,079 Total equity and liabilities... 22,209,780 (1) 22,883,325 Notes: (1) Derived from the audited consolidated financial statements as at and for the year ended 31 December

127 The following table sets forth, for the periods indicated, selected items from our consolidated statement of cash flows. For the three months ended 31 March (in RMB millions) Net cash flows from operating activities , ,614 Net cash flows from investing activities... (84,617) (198,296) Net cash flows from financing activities... 6, Net increase in cash and cash equivalents ,938 2,200 Cash and cash equivalents at beginning of the period ,263 1,441,298 Effect of exchange rate changes on cash and cash equivalents... (2,084) 1,864 Cash and cash equivalents at end of the period... 1,432,117 1,445,362 The following tables set forth a summary of our key financial and operating indicators for the periods or as at the dates indicated. For the three months ended 31 March Profitability indicators... Return on average total assets (1)(2) % 1.33% Return on weighted average equity (2)(3) % 17.12% Cost-to-income ratio (4) % 22.33% As at 31 December As at 31 March (in RMB millions, except percentages) Asset quality indicators... NPLs , ,659 NPL ratio (5) % 1.66% Allowance to NPLs (6) % % Capital adequacy indicators... Net Core Tier 1 Capital... 1,701,495 1,774,679 Net Tier 1 Capital... 1,781,062 1,854,320 Net Capital Base... 2,012,103 2,021,074 Core Tier 1 Capital Adequacy Ratio (7) % 12.87% Tier 1 Capital Adequacy Ratio (7) % 13.45% Capital Adequacy Ratio (7) % 14.66% 125

128 Notes: (1) Calculated on an annualised basis. (2) Calculated on an annualised basis. (3) Calculated by dividing net profit attributable to equity holders of the parent company by the weighted average balance of equity attributable to equity holders of the parent company, which is calculated in accordance with the Rules for the Compilation and Submission of Information Disclosure by Companies that Offer Securities to the Public No. 9 Computation and Disclosure of Return on Net Assets and Earnings per Share (Revision 2010) issued by the CSRC. (4) Calculated by dividing operating expenses (less business tax and surcharges) by operating income. (5) Calculated by dividing the balance of NPLs by total balance of loans and advances to customers. (6) Calculated by dividing allowance for impairment losses on loans by total balance of NPLs. (7) Calculated in accordance with the Capital Regulation. Net profit amounted to RMB74,904 million for the three months ended 31 March 2016, representing an increase of 0.60% over the same period of last year. Annualised return on average total assets and annualised return on weighted average equity were 1.33% and 17.12%, respectively, for the three months ended 31 March Operating income amounted to RMB168,992 million for the three months ended 31 March 2016, representing an increase of 1.92% compared with the same period of last year. Net interest income was RMB118,810 million for the three months ended 31 March 2016, representing a decrease of 5.17% compared with the same period of last year. Net fee and commission income was RMB43,485 million for the three months ended 31 March 2016, representing an increase of 16.86% compared with the same period of last year. Cost-to-income ratio was 22.33% for the three months ended 31 March As at 31 March 2016, total assets amounted to RMB22,883,325 million, representing an increase of RMB673,545 million or 3.03% from 31 December Total loans and advances to customers amounted to RMB12,345,706 million as at 31 March 2016, representing an increase of RMB412,240 million, or 3.45%, from 31 December 2015, of which RMB loans of domestic branches grew by RMB330,387 million, or 3.12% from 31 December In terms of the structure of loans and advances to customers, as at 31 March 2016, corporate loans were RMB8,114,037 million, personal loans were RMB3,699,462 million and discounted bills were RMB532,207 million. Total liabilities amounted to RMB21,009,246 million as at 31 March 2016, representing an increase of RMB599,985 million or 2.94% from 31 December Due to customers amounted to RMB17,038,081 million, representing an increase of RMB756,142 million or 4.64% from 31 December In terms of the structure of deposits, time deposits were RMB8,501,028 million, demand deposits were RMB8,310,721 million and other deposits were RMB226,332 million. Shareholders equity amounted to RMB1,874,079 million as at 31 March 2016, representing an increase of RMB73,560 million or 4.09% from 31 December According to the five-category classification of loans, the balance of non-performing loans amounted to RMB204,659 million as at 31 March The NPL ratio was 1.66%. The allowance to NPLs stood at % compared to % as at 31 December See Risk Factors - We may suffer actual losses on our loan portfolio that exceed our allowances for impairment losses and the CBRC may impose administrative and regulatory measures on us if our bad loans coverage ratio continues to fall below the ratio prescribed by the CBRC. for more information on allowance to NPLs below the level prescribed by the CBRC. As at 31 March 2016, the core tier 1 capital adequacy ratio was 12.87%, the tier 1 capital adequacy ratio was 13.45% and the capital adequacy ratio was 14.66%, all meeting regulatory requirements. 126

129 Other Recent Developments Recent Programme Establishments and Issuances On 26 May 2016, the Bank s New York Branch issued U.S.$600,000, per cent. notes due 2021 On 23 May 2016, the Bank s Hong Kong Branch issued U.S.$500,000, per cent. notes due On 10 May 2016, the Bank s Singapore Branch issued U.S.$800,000, per cent. notes due On 29 February 2016, the Bank s Tokyo Branch established a U.S.$4,000,000,000 medium term note programme on the professional-oriented TOKYO PRO-BOND Market. Application has been made, and approval has been obtained from the Tokyo Stock Exchange for the listing of notes issued under the programme. On 11 January 2016, the Bank s Luxembourg branch issued U.S.$500,000,000 floating rate notes due

130 FUNDING AND CAPITAL ADEQUACY FUNDING The funding operations of the Bank are designed to ensure stability of funding, minimise funding costs and effectively manage liquidity. Although customer deposits have always been its main source of funding, the Bank aims to maintain a diversified funding base. Its funding is primarily derived from deposits placed with the Bank by its corporate and personal customers. The Bank also derives funding from shareholders equity, debt instrument issuance and interbank borrowings. The Bank raises foreign currency from customers foreign currency deposits and occasionally from borrowings with counterparties. Where indicated financial information set forth in this section is extracted/derived from our audited financial statements for the years ended 31 December 2014 and Unless otherwise specifically stated so, all other financial information in this section is not extracted/derived from our audited financial statements. The following table sets forth, as at the dates indicated, our deposits from customers by business line and deposit type: As at 31 December Amount % of total Amount % of total (in RMB millions, except percentages) Corporate deposits Time deposits... 3,902, % 3,929, % Demand deposits... 4,134, % 4,507, % Subtotal... 8,037, % 8,437, % Personal deposits % Time deposits... 4,034, % 4,210, % Demand deposits... 3,153, % 3,390, % Subtotal... 7,188, % 7,601, % Other deposits (1) , % 243, % Total due to customers... 15,566, % 16,281, % Note: (1) Includes outward remittance and remittance payables. The following table sets forth, as at the dates indicated, the distribution of our due to customers remaining maturity: As at 31 December Amount % of total Amount % of total (in RMB millions, except percentages) Demand deposits (1)... 7,908, % 8,515, % Less than three months... 2,290, % 2,133, % Three to 12 months... 3,361, % 3,574, % One to 5 years... 1,958, % 2,055, % Over 5 years... 37, % 3, % Total due to customers... 15,566, % 16,281, % Note: (1) Includes time deposits payable on demand. 128

131 Capital Adequacy The Bank is subject to relevant capital adequacy requirements as promulgated by the CBRC. Before 2013, our core capital, supplementary capital and risk-weighted assets were calculated in accordance with the Administrative Measures on the Capital Adequacy Ratio of Commercial Banks ( 商業銀行資本充足率管理辦法 ) (the Capital Adequacy Measures) and other related regulatory rules in the PRC. The CBRC requires commercial banks to meet required capital adequacy ratios by the end of 2018 in accordance with the Capital Management Rules. Accordingly, since 2013, we have calculated and disclosed the capital adequacy in accordance with the Capital Management Rules. For systemically important banks like our Bank, CBRC requires minimum Core Tier 1 Capital Adequacy Ratio, Tier 1 Capital Adequacy Ratio and Capital Adequacy Ratio of 8.50%, 9.50% and 11.50%, respectively. The following table sets forth, as at the dates indicated, certain information relating to our capital adequacy level based on the Capital Management Rules and other related regulatory rules in the PRC. As at 31 December 2014 As at 31 December 2015 (in RMB millions, except percentages) Core Tier 1 Capital (3)... 1,498,403 1,713,160 Paid-in capital (3) , ,407 Valid portion of capital reserve (3) , ,963 Surplus reserve (3) , ,040 General reserve (3) , ,356 Retained profits (3) , ,853 Valid portion of minority interests (3)... 2,191 4,340 Others (1)(3)... (24,839) (5,799) Core Tier 1 Capital deductions (3)... 11,670 11,665 Goodwill (3)... 8,487 8,478 Other intangible assets other than land use rights (3)... 1,279 1,356 Cash flow hedge reserves that relate to the hedging of items that are not fair valued on the balance sheet (3)... (3,796) (3,869) Investment in Core Tier 1 Capital instruments issued by financial institutions that are under control but not subject to consolidation (3)... 5,700 5,700 Net Core Tier 1 Capital (3)... 1,486,733 1,701,495 Additional Tier 1 Capital (3)... 34,500 79,567 Net Tier 1 Capital (3)... 1,521,233 1,781,062 Tier 2 Capital (3) , ,641 Valid portion of tier 2 capital instruments and related premium (3) , ,242 Surplus provision for loan impairment (3) ,633 63,398 Valid portion of minority interests (3) ,001 Tier 2 Capital deductions (3)... 15,800 13,600 Significant minority investments in tier 2 capital instruments issued by financial institutions that are not subject to consolidation (3)... 15,800 13,600 Net capital base (3)... 1,812,137 2,012,103 Risk-weighted assets (2)(3)... 12,475,939 13,216,687 Core Tier 1 Capital Adequacy Ratio (3) % 12.87% Tier 1 Capital Adequacy Ratio (3) % 13.48% Capital Adequacy Ratio (3) % 15.22% Notes: (1) Others were foreign currency translation reserve. (2) Additional Tier 1 Capital was valid portion of minority interests. (3) Derived from the audited consolidated financial statements as at and for the years ended 31 December 2014 and

132 RISK MANAGEMENT ENTERPRISE RISK MANAGEMENT SYSTEM As a commercial bank, we are subject to a number of risks, primarily including credit risk, market risk, operational risk, liquidity risk and compliance risk. In order to manage these risks, we have established an enterprise risk management system, a process whereby our Board, senior management and other employees perform their respective duties and responsibilities to take effective control of different types of risks at various business levels in order to provide a reasonable guarantee of the achievement of our risk management objectives. Our risk management principles include, among others, the matching of risk with return, internal checks and balances with consideration as to efficiency, risk diversification, quantitative and qualitative analysis, dynamic adaptability adjustments and gradual improvement. We promote the consistency and standardisation of our risk management policies, processes, models, methods and systems. Our head office guides, manages and controls the business activities of our branches through delegation and credit extension, risk limits and other risk control instruments. Our organisational structure for risk management comprises, among others, our Board and its special committees, our senior management and its special committees, our risk management department and our internal audit department. Our risk management organisational structure is illustrated below. Note: Substantial risks such as country risk and reputational risk have been incorporated into the enterprise risk management framework. Our Board is responsible for the establishment and implementation of an effective internal control system for the Bank to ensure that the Bank operates within applicable legal and regulatory frameworks. Our senior management is responsible for implementing risk management strategies formulated by the Board, formulating risk management 130